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c. What are some limitations on using currency futures or options that may make it difficult...

c. What are some limitations on using currency futures or options that may make it difficult for you to perfectly hedge against exchange rate risk over the next year or so.

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Answer #1

Limitations on using currency futures or options that make it difficult to hedge against exachange rate risk

●Foreign exchange risk leads to uncertainty in foreign exchange fluctuations.

● Depreciation in currency at the time of making payments

● The number of investments,trades,dealings are shelved due to unwillingness of parties concerned to bear foreign exchange risk

● Legal obligations

●Standardized features of futures and options

●Forego favorable movements

● Speculation and Arbitrage

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