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Hedging There are some risks involved with international transactions due to fluctuations of the foreign currency exchange rates. One way to mitigate those risks is

Hedging

There are some risks involved with international transactions due to fluctuations of the foreign currency exchange rates. One way to mitigate those risks is through hedging.

Discuss the hedging options: forward contracts and option contracts.

What are the advantages and disadvantages of each alternative?

What are the costs of each alternative? When is one alternative preferred over the other alternative?

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