Samsung $($South Korea$)$ has an account payable of USD$8$ million to Dow Chemical Corp $($USA$)$ to purchase $10$ tonnes of phone$-$based plastic material in one year$$s time. The spot rate is KRW$1,322\mathrm{.}88/$USD$.$ Samsung expects the USD to appreciate to KRW$1,360/$USD next year.

Given the discussions in the lectures, which of the following is recommended that Samsung can employ to manage its exchange rate risk?

Question $13$Answer

a$.$

Currency Forward Contract.

b$.$

Neither currency forwards nor currency options are acceptable methods for hedging exchange rate risk in this instance.

c$.$

Currency Options Contract$($s$).$