Retreat from square by cavalry

In a recent game (Aspern Essling), a french light cavalry unit attacked an Austrian line battalion which went into battalion MASS. The Asutrians threw a flag and the cavalry bounced off BUT the battalion and the cavalry were on the French edge hex of the board so what happens? The french cavalry was full strength (4 block) unit, does it bounce off, cannot retreat and lose one block but still fight the square? Does it lose a block but not fight eh square as bounced off OR does it retreat along the base line. We did the third option (agreed between us) but interested if any views on this?

No personal answers or interpretations here.

A board edge cant left by retreating, so an unit stops on board edge and loose one block FOR EACH hex it doesnt/cant retreat.

If the unit have still one block left (still alive), it may battle then, if it is still in the original hex of the battle start.
If the start hex is the board edge hex, the unit may battle back then.
As i said, its ALL in the rules, sadly i have not the time and the passion, to search and copy all out and paste in here again

Thank you for such a gracious answer