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.
a. How can MTB Pty Ltd. use the currency options to hedge foreign-currency
exposures resulting from international transactions? (2 marks)
b. Describe the key benefit and the key drawback of using currency options
rather than future and forwards contracts? (2 marks