Advanced Hedging Strategies for Currency Risk

Consider a multinational corporation, GlobalTech Ltd., which generates significant revenues in euros while most of its operating expenses and capital expenditures are denominated in US dollars. The current EUR/USD exchange rate is 1.10, and GlobalTech Ltd. expects to receive €100 million within the next 12 months. The corporation is concerned about a potential depreciation of the euro against the dollar and is seeking an effective hedging strategy using derivatives to protect its cash flow.

In your essay, analyze the various derivative hedging strategies GlobalTech Ltd. could employ to mitigate its foreign exchange risk. Discuss the pros and cons of at least two different strategies, including forward contracts, options, and any appropriate combinations. Evaluate the effectiveness of these strategies in the context of current market conditions and the corporation's specific risk exposure. Support your arguments with relevant numerical examples where appropriate.