Explain and compare the costs of hedging, Financial Management

Explain and compare the costs of hedging via the forward contract and the options contract.

Answer: There is no up-front cost of hedging through forward contracts. Though, in the case of options hedging hedgers should pay the premiums for the contracts up-front. Though, the cost of forward hedging may be realized ex post while the hedger regrets his/her hedging decision.

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