Request PDF on ResearchGate | Hedging Currency Risks at AIFS | SUBJECT AREAS: Currency, Foreign exchange, Foreign exchange rates. There are several factors that give rise to currency exposure at AIFS. One of these is the fact that most of their revenues are denominated in. In order to limit or eliminate this risk, AIFS has to hedge their currency exposure. At the moment the company hedges % of their exposure using forward.

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Hedging Currency Risks at AIFS by Zachary Connolly on Prezi

hedbing Click to learn more https: A more flexible but meanwhile more expensive strategy to hedge is only using currency options. The remainder of your paper should support your conclusion and recommendations. In order to limit or eliminate this risk, AIFS has to hedge their currency exposure. That means, with the current spot rate of 1.

HBS Case: Hedging Currency Risks at AIFS Essay

Thus costs would increase by The higher the costs turn out, the higher this negative effect would be in nominal amount. So if the spot rate at expiry is higher than the strike price, AIFS can exercise their option and buy foreign currency for the lower strike price.

Finance General Management Marketing. We’ll occasionally send you account related and promo emails. How should NG go about convincing its customers? What could NG learn from companies in other industries curfency have relied on customer support to shift to responsible business practices?

In the case of a strong dollar 1. AIFS sets guaranteed prices for its exchanges and tours a year in advance, before its final sales figures are known. AIFS has a hedging policy, but the controllers want to review the percentage of exposure that is covered and the use of forward contracts and options. Sorry, but copying text is forbidden on this website. The dollar remains stable 1. In the following table the impact on the costs in different scenarios are summarized using the same hsdging as in the table above.


If you contact us after hours, we’ll get back to you in 24 hours or less. Should Selim give up a very successful career to compete in a highly competitive business, in which it could be very hard to build a differentiated offering?

Hedging Currency Risks at AIFS

The impact on the cost if nothing is hedged arises merely from the difference in the spot rate and is much stronger than in the hedged case. The text analysis of your case should be about pages double-spaced. Your Answer is very helpful for Us Thank you a lot! It was still unclear though how fast customer demand for robust compliance programs disks affect the competitive dynamics.

Harvard Case Study Points will be deducted for grammar mistakes and typos. How about receiving a customized one? We use cookies to give you the best experience possible. Now Becky Tabaczynski, CFO of one of the main divisions, is creating a model, including different scenarios, with the goal of heging which proportion of the exposure should be hedged at all and in which proportion forward contracts hwdging currency options should be used for hedging.

Sorry, but copying text is forbidden on this website! The firm’s revenues are mainly in U. The grading will be based on the quality of your analysis sifs writing. Valuation ; Corporate Finance. How about make it original? The controllers need to ensure that the company adequately hedges its foreign exchange exposure and achieves an appropriate balance between forward contracts and currency options.

Hi there, would you like to get such a paper? This support should be based on your definition of the problem and inferences that you draw from the facts of the case. Due to their business model the revenues of the company are denominated only in USD, since the cirrency is for American students who pay in USD. Hi, I am Currsncy from Studymoose Hi there, would you like to get such a paper?


Hexging only forward contracts to hedge results into no impact on the costs in any case since the exchange rate is fixed no matter what happens and there is no initial cost entering the contract. If actual dollar costs were lower than expected, the impact would be positive. We use cookies to give you the best experience possible.

This case should be done individually. Having brought employees on board, he was planning to relentlessly engage customers, regulators, and security agencies.

Comparing the results of the table shows the advantages and disadvantages of each strategy. Osmundsen was convinced that his turnaround strategy would be effective.

Options instead would give the company more flexibility, which is a major issue since not only the exchange rates fluctuate but also the volume of participants. You should prepare a written analysis, and hand in two copies of your analysis on April 12 in class.

HBS Case: Hedging Currency Risks at AIFS Essay Example for Free

If you need this or any other sample, we can send it to you via email. If the dollar weakens against the euro and the exchange rates rises to 1. How to cite this page Choose cite format:

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