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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George Serafeim and Shannon Gombos. Points will be deducted for grammar mistakes and typos. You should prepare a written analysis, and hand in two copies of your analysis on April 12 in class. AIFS sets guaranteed prices for its exchanges and tours a year in advance, before its final sales figures are known.

This would simplify the hedging approach and currrency would be reasonable the business model of AIFS forces them to keep afs exchange every year.

Your Answer is very helpful for Us Thank you a lot! Leave your email and we will send you an example after 24 hours In the first column the proportion of the hedged amount is given and in the second and third column of the table the proportions of forward contracts and currency options used to hedge are listed respectively. Suppose the company has fixed the prices for the current season and now the costs in Europe are one million euros, while the exchange rate is at 1.

If you need this or any other sample, we can send it to you via email. What other mechanisms existed to level the playing field if NG did not succeed in convincing the customers?


Hedging Currency Risks At Aifs Essay Example | Studymoose

How about make it original? Sorry, but copying text is forbidden on this website! 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. A more flexible but meanwhile more expensive strategy to hedge is only using currency options.

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Hedging Currency Risks at AIFS by Zachary Connolly on Prezi

How about aif a customized one? If you contact us after hours, we’ll get back to you in 24 hours or less. How to cite this page Choose cite format: Hi there, would you like to get such a paper? Not hedging at all could have disastrous consequences for the whole company because in the case of a weak dollar the costs could rise drastically while the revenues remain fixed.

And if the spot rate at expiry is less than the strike price, AIFS can forget about the option and buy for the lower spot rate. Structure is important for your argument to be lucid and transparent. Now Becky Tabaczynski, CFO of one of the main divisions, is creating a model, including different scenarios, with the goal of identifying which proportion of the exposure should be hedged at all and in which proportion forward contracts and currency options should be used for hedging.

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About the Author Mihir A. It was still unclear though how fast customer demand for robust compliance programs would affect the competitive dynamics.

How about receiving a customized one? We use cookies to give you the best experience possible. DesaiVincent Dessain and Anders Sjoman. What happens if sales volumes are lower or higher than expected as outlined at the end of the case? The biggest stake of the costs are in euro and pound sterling, hence these two currencies are of major concern.


In consequence of the fluctuating exchange rate of USD against foreign currencies and the fact that AIFS fixes the price for their services before the costs can be estimated, the firm faces an inevitable currency exposure.

If the dollar weakens against the euro and the exchange rates rises to 1.

Harvard Case Study Sorry, but copying text is forbidden on this website. That means AIFS ar have to pay the option premium in any case but this strategy allows to profit from unlimited favourable movements while limiting losses by the premium. The text analysis of your case should be about pages double-spaced. Technology and Operations Management.

Hedging Currency Risks at AIFS Essay

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. That means, with the current heddging rate of 1. Business and Environment Business History Entrepreneurship. Hi there, would you like to get such a paper? The remainder of your paper should support your conclusion and recommendations.

The possible outcomes in the two described strategies and a scenario with no hedge at all are summarized in the table below. Valuation ; Corporate Finance. The firm’s revenues curreny mainly in U. Could Arabesque be something different in the world of asset management?