How would you hedge these exposures

Reference no: EM13281413

A US-based firm expects to receive a payment of 500,000 euros at t = 1 and expects to make a payment of 300,000 euros at t = 2. (i) How would you hedge these exposures if hedging entailed no cost? (ii) How would you hedge these exposures if hedging entailed significant costs? (iii) When hedging is costly is your foreign currency exposure completely hedged? Explain. (Assume that all the securities necessary for hedging are available)

Reference no: EM13281413

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