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Key drawback of using currency options

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Reference no: EM132421311

Problem: MTB Ltd. is an Australian exporter, sold a special raw material to a manufacturing company based in Switzerland. The sale is denominated in Swiss francs with payment due upon delivery in three (3) months, amount is CHF 200,000.

Required:

Question 1: How can MTB Pty Ltd. use the currency options to hedge foreign-currency exposures resulting from international transactions?

Question 2: Describe the key benefit and the key drawback of using currency options rather than future and forwards contracts?

Reference no: EM132421311

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