Company has a receivable in euro for the amount of 11,000,000 euro in one year. You are trying to hedge this receivable using the techniques. What is the probability that forward hedge outperforms the Money Market Hedge?

Asis provides you with the following information.

Exchange rate changes and market conditions are the main factors that determine whether a Forward Hedge will perform better than a Money Market Hedge. Calculate the spot rate, which is the exchange rate between two currencies that can be traded immediately. This figure is then compared with the expected future value of the receivable – taking into account any factors such as interest rates or inflation. Finaly, comparing both the risks and costs associated with forwards or money markets can help you make an educated decision on which method is most likely to deliver superior results.

In terms of your specific situation – where you’re trying to hedge a 11 million euro receivable due in one year – it’s important to consider how much this amount could change over time given current market conditions. In the event that there is little risk of significant fluctuations in exchange rates during the period you are attempting to hedge, it may be unnecessary to do so as any gains would far outweigh its cost. A forward contract may be worth looking at if you have some reason to believe that exchange rates will fluctuate significantly prior to repayment. This could compensate any fees.

Ultimately, while predicting outcomes when hedging foreign exchange transactions can prove challenging at times due to fluctuating market forces – properly analyzing available options and assessing their effectiveness beforehand can help maximize returns and minimize losses.