You are the CFO of a Canadian based company that reports in Canadian currency. The firm is exposed to various uncertainties. What type of financial contract (i.e. with a symmetrical payoff profile) and position will you consider in order to reduce any risk exposure for the following situations? (Hint: Draw payoff diagrams.)

a. Your firm will pay significant cash (costs) (denominated in foreign currency) 1 month from now from operations in Australia.

b. Silver represents one of the largest input costs for one of your business units. Your internal forecast suggests silver prices to significantly increase over the next year. You plan to purchase silver for your operations at market prices