The real cost of hedging payables with a forward contract will be zero.
What are hedging payables?
Foreign currency futures or forward contracts can be bought to hedge payables. A money market hedge strategy is an alternative; in this scenario, the MNC borrows its home currency and converts the proceeds into the foreign currency that will be required in the future.
Hedging is accomplished by purchasing a currency with opposite currency exposure. For instance, if a business has the commitment to provide one million euros in six months, it might mitigate this risk by agreeing to buy one million euros on the same date, enabling it to buy and sell on the same day in the same currency.
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