28 Nov
Hedging Through Currency Options | CA Final SFM
Hedging Foreign Exchange Risk Through Currency Options
- If the company that is planning to hedge the foreign exchange risk, is an importer and has to settle the payment in foreign currency, it will have the need to buy such foreign currency.
- If such Importer company uses currency option to hedge its foreign exchange risk
- It should become a call option holder if the option contract is available in foreign currency.
- It should become a put option holder if the option contract is available in local currency.
- If the company is an exporter and has to receive the amount in foreign currency, it will have the need to sell such foreign currency.
- If the exporter company uses currency option to hedge its foreign exchange risk,
- it should become a put option holder if the option contract is available in foreign currency.
- It should become a call option holder if the option contract is available in local currency.
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