If a U.S. firm has €3 million payable in the future, which option should it buy to hedge against a rise in the euro's value?
- Call option on Euro
- Put option on Euro
- Call option on U.S. Dollar
- None of these
Explanation
- A U.S. firm with €3 million payable in the future should buy a Call Option on Euro.
- The firm will need to buy euros in the future to make the payment.
- If the euro appreciates, the call option allows the firm to buy euros at the predetermined strike price.
- This protects the firm against an increase in the dollar cost of the euro payment.
Last verified on 14-08-2026
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