Forward versus Currency Option Contracts
Response to the following:
What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather than a forward contract on euros to hedge its exposure in euros?
Explain why an MNC may use forward contracts to hedge committed transactions and use currency options to hedge contracts that are anticipated but not committed.
Why might forward contracts be advantageous for committed transactions, and currency options be advantageous for anticipated transactions?