An Italian company buys $2 million of gold from the commodity market every 12 months to produce industrial products. The company has committed to sell its products at a fixed euro price for one year. As the CFO of the company, you want to minimize the financial risks and, if possible, to generate some profits for your company with the following information:

Assume the actual spot rate S1/$ in one year: 0.8600 /$ and 1.0100 /$ respectively

Current spot rate: S0$/ = $1.1121/; Interest rate is 1.5% in US and 0.05% in Europe;

How do you plan to hedge the currency risk

Through swap? List your action plan by step starting with your original exposure (no currency amount is required).

a.First,through commodity swap to convert USD spot commodity price toLIBOR $. Second, through interest rate swap to convertLIBOR $toFixed rated $. Last, through currency swap to convertFixed rated $to Fixed rate.

b.First,through commodity swap to convert USD spot commodity price to Fixed rated $. Second, through interest rate swap to convertFixed rated $ to LIBOR $. Last, through currency swap to convertLIBOR $ to Fixed rate.

c.First,through commodity swap to convert USD spot commodity price to Fixed rated $. Second,through currency swap to convertFixed rated $to Fixed rate.Last,through interest rate swap to convertFixed rateto LIBOR.

d.First,through commodity swap to convert USD spot commodity price to LIBOR$. Second,through currency swap to convertLIBOR$to LIBOR rate.Last,through interest rate swap to convertLIBOR to Fixed rate.