Why is Cain concerned by the exchange rate fluctuation? Is her position long or short?
If Can decides to use options would she use a put or a call?
Calculate the impact of the two hedging strategies and the unhedge positionunder the following three scenarios at the end of January:
US$ = C$
US$ = C$0.90
US$ = CS1.10 (to simplify, ignore difference in time value over the 3-month period.)
Should Cain hedge her position in US$? Why or why not?
Which hedge should she use?
If you chose the option, specify the option price.
The paper should consist a brief description of the case, an explanation of the problem, alternative solutions, your recommendations, including materials, such as spreadsheets, needed to justify your recommendation