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What Is an Advantage of Using Options Instead of Forward

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What is an advantage of using options instead of forward contracts when hedging against exchange-rate risk?


Definitions:

Biological Magnification

The process by which the concentration of toxic substances increases in each successive link in the food chain.

Bioaccumulation

The buildup of a persistent toxic substance, such as certain pesticides, in an organism’s body.

DDT

Dichloro-Diphenyl-Trichloroethane, a synthetic insecticide used historically for malaria and pest control, now banned in many countries due to environmental impact.

Nitrogen Cycle

A biogeochemical cycle that describes the transformations of nitrogen and nitrogen-containing compounds in nature.

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