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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In the following table the impact on the costs in different scenarios are summarized using the same methodology as in the table above.

hedgung The company’s controllers review the hedging activities of AIFS. Finance Globalization Health Care. What happens if sales volumes are lower or higher than expected as outlined at the end of the case?

How about receiving a customized one? 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.

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

Sorry, but copying text is forbidden on this website. Due to their business model the revenues of the company are denominated only in USD, since the offer is for American students who pay in USD.

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How about receiving a customized one? Meanwhile the costs of the company is mostly denominated in foreign currency because AIFS has to pay the transport, the hotel and much more in the countries in which their customers are travelling, hence the firm has to pay in the local currency of these ah. If you contact us after hours, we’ll get back to you in 24 hours or less. How about make it original?

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.

Hedging Currency Risks At Aifs Essay Example | Studymoose

In consequence of the fluctuating exchange rate of USD against foreign hedting and the fact that AIFS fixes the price for their services before the costs can be estimated, the firm faces an inevitable currency exposure. What would happen if Archer-Lock and Tabaczynski did not hedge at all?

We’ll occasionally send you account related and promo emails. How about make it original? Structure is important for your argument to be lucid and transparent. If actual dollar costs were lower than expected, the impact would be positive.

Accessed December 31, 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.

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. Cite View Details Educators Purchase.

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We will write a custom sample essay on HBS Case: Accessed December 31, Osmundsen had relentlessly pushed an agenda that involved transforming and professionalizing the waste management industry to mitigate instances of corruption and other crimes.

If you need this or any other sample, we can send it to you via email. The impact on the cost if nothing is hedged arises merely from the difference in aits spot rate and is much stronger than in the hedged case. It was still unclear though how fast customer demand for robust compliance programs would affect the competitive dynamics.

HBS Case: Hedging Currency Risks at AIFS Essay

Comparing the results of the table shows the advantages and disadvantages of each strategy. In order to limit or eliminate this risk, AIFS has to hedge their currency exposure.

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In order to hedge its foreign exchange exposure, AIFS can use an appropriate balance between forward contracts and currency options to achieve the goal.