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What is Hedging Yen Payables: Options vs Futures about?

If Blades Inc. chooses to hedge its future yen payment using currency derivatives, it has two main options: purchasing call options or a futures contract. Purchasing two call options would cost approximately $98,400 total due to premium payments, while a futures contract would lock in the payment at $86,400. However, the call options provide more flexibility since the actual payment amount would depend on the future spot exchange rate, while the futures contract fixes the payment now. Therefore, the optimal

Author

Afreen Redita

Language

EN