You and your team are part of the Risk Analysis Division (RAD) in ABX Corporation, an Australian producer and exporter of various grades of coals. Until recently, China was the main importer of ABXs coals, comprising almost 85% of its businesses (NB: all invoicing to Chinese export was fixed in Chinese yuan requiring no FX risk management strategy). However, as the Chinese market is completely wiped out now, ABX desperately needs to find at least two markets (i.e., countries) to cover the businesses lost. ABX also needs to relocate the coal processing plants it had in China. All these accompanied by the COVID-19 pandemic, complex geopolitical environment, trade clash, Russia-Ukraine war, and frequent policy changes at the government level that are making it challenging for the MNCs to make firm decisions in regard to FDI and managing foreign exchange risks. Looks like Black swans hit the markets in unison. No financial risk management tool seems to work. Given this background, the Head of the RAD has recently shortlisted three markets It approaches your division with the companys dilemma:

2. The Head of the RAD is aware that once ABX moves to different international markets, they will face foreign exchange risk but does not really know what exchange rates are in operation in those countries. Hence, the RADs Head asks your team to evaluate at least two FX derivative strategies and recommend the best FX management strategy to manage the unknown FX risks in brazil