In Example 10.2, a forward contract was used to establish a derivatives hedge to protect Centralia from

Question:

In Example 10.2, a forward contract was used to establish a derivatives "hedge" to protect Centralia from a translation loss if the euro depreciated from €1.1 000/ $1.00 to €1.1,786/$1.00. Assume that an over-the-counter put option on the euro with a of € 1.1393/$ 1:00 (or $0.8777/€1.00) can be purchased for $0.0088 per euro. Show how the potential translation loss can be ''hedged'' with an option contract.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.