Question (10 marks)
Consider the situation of AIR NZ, an international airline based in New Zealand. As part of its business it is heavily exposed to fluctuations in the price of jet fuel and foreign exchange rates. It sells tickets in foreign currencies and has significant USD costs.
For either jet fuel costs or forex, evaluate one derivative product AIR NZ could use to hedge fluctuations in the underlying price.
Briefly describe how the product would be used to hedge the fluctuations
Discuss the pros and cons of this product
Suggestions and recommendations
Your answer should be no more than 500 words excluding the reference l