Hedging Currency Risk for Multinational Operations

ABC Multinational Corporation operates in several countries and generates significant revenue in foreign currencies. Recently, the company has been focused on managing its currency risk due to increasing volatility in exchange rates. The CFO has proposed several strategies for hedging the company’s foreign currency exposure.

One of the strategies under consideration is to use foreign currency forwards to lock in exchange rates for anticipated future cash flows in foreign currencies. Additionally, the CFO suggests using options, which provide the right but not the obligation to exchange currencies at a predetermined rate.

Considering the nature of these hedging instruments, which option outlined below provides the most effective way for ABC Corporation to manage its currency risk associated with its anticipated foreign revenue?