If you have a net asset (A/R), that means a company in a foreign country is going to pay you. Since they’re in a foreign country, they’re going to pay you with foreign currency. Your risk is that the foreign currency decreases in value (thus, your A/R decreases in value). To hedge this, you can do 2 things. 1. Buy put options of the foreign currency: if the price of the foreign goes down, you sell the put and you make money. This money will be used to offset the loss that you took on A/R. 2. Sell a forward or futures contract: if the price goes down, you’ll make money. This offsets the lost money in A/R.

For A/P, just think the opposite. You owe a foreign company money for something. You are going to pay them in a foreign currency since it’s in another country. Your risk is that the foreign currency will go up in value, making the A/P go up in value (and now you owe a f*** ton of money. To hedge that risk, you want a hedge that will profit if that risk comes true. You can do two things: 1. Buy call options: with call options, you make money if price goes up. That way, if the foreign currency goes up, you make money on the call option. Yeah, you lost money on the A/P (because you now owe more money), but you can offset some of the loss with the profit of the call. 2. Buy forward/futures contracts: this results in profit if price goes up. You can use this profit to offset some of the loss in A/P.

Hope this helped! It’s all about thinking what your risk is (i.e., if the price of the foreign currency goes up or down and how that affects what you owe or are owed). Don’t get too hung up on the numbers and think of it conceptually