20. If you are manufacturing consumer products that use oil-based chemicals as inputs, then you are subject to oil price risk. Suppose you order your oil from Saudi Arabia and usually pay for it in Saudi rials. You are now concerned that the appreciation in the rial will affect your profitability.
(a) How would you use forward contracts to hedge the risk of your oil purchases?
(b) What type of quanto option would you like to buy to hedge this risk? (See Question 18 for the definition of a quanto.)
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.