Limitation of Hedging an Uncertain Payment
A solution to overhedging is to hedge only the minimum known payment in the future transaction. In the previous example, if the future receivables could be as low as SF120,000, Viner could hedge this amount using a money market hedge
If the actual transaction turns out to be SF200,000 as expected, Viner will be only partially hedged and will need to sell the extra SF80,000 in the spot market or it could have bought a put option as well as used a money market hedge. The put could be exercised if the amount received exceeds the minimum amount hedged with the money market hedge