ABC is a Thai firm listed on the Stock Exchange of Thailand (SET). The following equation is the result from a regression analysis, whereby the return on ABC stock (rABC,t) is the dependent variable and the return on the SET index (rSET,t), the change in USD exchange rate (stB/U$) and the change in AUD exchange rate (stB/U$) are independent variables.

rABC,t = 0.01 + 0.95rSET,t 0.15stB/U$ + 0.20stB/A$ + eABC,t

Returns are measured as monthly returns over the period 2015-2020. Exchange rates are quoted as number of THB per 1 unit of a foreign currency.

1.1. Comment on ABCs foreign currency exposure to USD and AUD. Hint: Explain the type and the direction of the exposure.

1.2. If ABC were to use currency options to hedge the exposure, which FX options should ABC purchase?

ps. I also attached the snapshot of the equation in case that the above one is hard to read. Thank you so much in advance :)

rABC,t = 0.01 + 0.95.rset,t - 0.15.s+B/U$ + 0.20-S4B/A$ + E =