Question
Derivitavices and alternatives investments: Gund is a company producing plush stuffed animals, based in New Jersey, United States. It has recently signed a contract to
Derivitavices and alternatives investments:
Gund is a company producing plush stuffed animals, based in New Jersey, United States. It has recently signed a contract to deliver 100,000 Itty Bitty Boo stuffed unicorns, at 11 apiece, which represents 5% profit for the company.
The whole sum of 1,100,000 will be paid at the time of delivery in 6 months. But Gund's CFO, Chris Jasko, is worried. USD/EUR exchange rate has been very volatile lately, and if the U.S. dollar straightens more than 5%, the whole deal will produce a loss.
Help Chris with this problem and design a hedging strategy. (Hint: no calculation is required, just an outline of what derivative contracts could be used will suffice.)
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