Assignment
HBS Case: Hedging Currency Risks at AIFS
Where to get the case: Hedging Currency Risks at AIFS, Harvard Business School Case, #9-205-026, 2007.
Instruction
This case should be done individually. You should prepare a written analysis, and hand in two copies of your analysis on April 23 in class. Only hard copies of the case analysis are accepted. I will submit one of the copies to the Dean's office for assessment purpose. Each student should also bring his/her own copy of the write-up to class, as well as the case itself, so that we can refer to the specifics in our discussion. The text analysis of your case should be about 3 to 5 pages. You should download the excel spreadsheet for the case at the Blackboard, complete the quantitative analysis using the spreadsheet, and attach the spreadsheet to your case write-up to support your arguments.
Your write-up should begin with an opening paragraph that defines the main problem in the case and your recommended solution. The remainder of your paper should support your conclusion and recommendations. This support should be based on your definition of the problem and inferences that you draw from the facts of the case. Structure is important for your argument to be lucid and transparent.
Your case should address the following questions:
• What gives rise to the currency exposure at AIFS?
• What would happen if Archer-Lock and Tabaczynski did not hedge at all?
• What would happen with a 100% hedge with forwards? A 100% hedge with options? Use the forecast final sales volume of 25,000 and analyze the possible outcomes relative to the "zero impact" scenario described in the case.
• What happens if sales volumes are lower or higher than expected as outlined at the end of the case?
• What hedging decision would you advocate?
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.