GlobalTech Innovations, a multinational corporation based in the United States, operates in several countries, including Europe and Asia. Recently, they entered into a contract denominated in euros for machinery worth €2 million. Given the volatility in the euro-to-dollar exchange rate, the CFO is concerned about potential losses due to currency fluctuations.
In response, GlobalTech is considering three hedging strategies to mitigate this risk:
1. Utilizing a forward contract to lock in the current exchange rate for the euro, ensuring that they know the exact dollar amount they will pay at the time of delivery.
2. Buying a call option on euros, which allows them to purchase euros at a predetermined strike price while giving them the flexibility to benefit from favorable movements in the exchange rate.
3. Engaging in a currency swap where they exchange euros for dollars now and agree to reverse the transaction at a set date in the future.
Which of the following strategies exposes GlobalTech Innovations to the greatest risk of currency loss if the euro appreciates against the dollar?