
272 INTERNATIONAL FINANCIAL MANAGEMENT
enable the Indian industry and businesses to compete better in international markets
by hedging currency risk.
• Non-linearpayoffoftheproductenablesitsuseashedgeforvariousspecialcasesand
possible exposures. For example, if an Indian company is bidding for an international
assignmentwherethebidquotewouldbeindollarsbutthecostswouldbeinrupees,
then the company runs a risk till the contract is awarded. Using currency swaps or
forwards would create reverse positions if the company is not allotted the contract,
but the use of an option contract in this would freeze the liability ...