The zero-cost double KO/KI forward

Background: A Canadian company with Mexican-based manufacturing operations recently approached our foreign exchange sales desk to come up with an alternative hedge for its long US dollar receivables and short Mexican peso transaction risk. The company is long US dollars as most of its receivables are denominated in US dollars, yet a majority of its cost is in Mexican pesos. The company has done a reasonably good job in offsetting its long US dollar position by creating natural hedges (ie

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