Discussion

Currency hedging Alpha and Omega are U.S. corporations. Alpha has a plant in Hamburg that imports components from the United States, assembles them, and then sells the finished product in Germany. Omega is at the opposite extreme. It also has a plant in Hamburg, but it buys its raw material in Germany and exports its output back to the United States.

How is each firm likely to be affected by a fall in the value of the euro?

How could each firm hedge itself against exchange risk?