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Suppose that the exchange rate is €1.25 = £1.00.Options (calls and puts) are available on the London exchange in units of €10,000 with strike prices of £0.80 = €1.00.Options (calls and puts) are available on the Frankfurt exchange in units of £10,000 with strike prices of €1.25 = £1.00. For an Italian firm to hedge a £100,000 payable,
A. buy 10 call options on the pound with a strike in euro.
B.buy 8 put options on the euro with a strike in pounds.
C. buying 10 call options on the pound with a strike in euro or buying 8 put options on the euro with a strike in pounds will both work.
D. none of the options
