Question
What are the pros and cons of choosing a Plain Vanilla Swaps strategy versus The Call Options(CAPS) strategy for airlines' fuel hedging strategies? For instance,
What are the pros and cons of choosing a Plain Vanilla Swaps strategy versus The Call Options(CAPS) strategy for airlines' fuel hedging strategies?
For instance, Southwest Airlines can choose swap strategies such as a plain vanilla jet fuel swap arranged in the OTC market or the NYMEX New York Heating Oil Calendar Swap contract. They can also choose call option strategy like buying an option on heating oil as a cross-market hedge against a rise in the price of jet fuel.
What is the advantages and disadvantages of these two kind of hedging strategies?
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