How do eliminate exchange rate risk

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Problem 1: A Japanese EXPORTER has a €1,000,000 receivable due in one year. Euro option (either call option or put option) is €62,500 in size per contract, and exercise price is $1.25/€. Yen option (either call option or put option) is ¥12,500,000 in size per contract, and exercise price is ¥100/$. Detail a strategy using options that will eliminate exchange rate risk.

A. Buy 16 put options on euro, sell 10 call options on yen.
B. Buy 16 put options on euro, buy 10 call options on yen.
C. Sell 16 call options on euro, buy 10 put options on yen.
D. None of the above

Reference no: EM132752939

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