Hedging currency risks at aifs case harvard business. Aifs a student exchange organization that organizes educational and cultural exchange programs throughout the world. Get your hedging currency risks at aifs case solution at is the number 1 destination for getting the case studies analyzed. Archerlock on its monthly report made recommendations for the future hedging. Aifs 1 what gives rise to the currency exposure at aifs. One of these is the fact that most of their revenues are denominated in. Case solution furthermore, the external environment threats have significant negative impact on the sales, such as terrorist attacks, military coups in the country, and civil war in the visiting country, these all factors negatively affect the sales, because no one will be ready for taking risk on for any educational or cultural exchange program. Oct 20, 2016 get your hedging currency risks at aifs case solution at is the number 1 destination for getting the case studies analyzed. Dollars, but most of its costs are in eurodollars and british pounds. Archerlock is the controller of aifs and tabaczynski is the cfo of aifss high school travel division acis. This edition of trends takes an indepth look at the currency exposure of portfolios with an international focus.
Currency options a currency option is a financial instrument that gives its owner the right but not the obligation to buy or to sell a certain amount of currency at a predetermined price, up to a certain time in the future. Aifs 1 what gives rise to the currency exposure at aifs the. Case study essay hedging currency risks at aifs the american institute for foreign study aifs is offering cultural exchange programs for american students and high school pupils throughout the world. Foreign currency transactions and hedging hedging currency risk at aifs case 1. The dossier article looks at this topic in terms of strategy. Hedging exchange risk is a strategy that should be considered during periods of unusual currency volatility. The author of this theory suggests that firm must be valuable, rare, imperfectly imitable and perfectly non sustainable. Aifs s currency exposure hedging strategies 1 bottomline risk hedging strategies 2 currency exposure or foreign exchange risk. Therefore, the organization must come with effective hedging policies to withstand the currency exposure and operate a sustainable organization. Currency hedging at aifs essay example bla bla writing. Hedging currency risks at aifs case study solution and. Hedging currency risks at aifs case analysis, hedging currency risks at aifs case study solution, hedging currency risks at aifs xls file, hedging currency risks at aifs excel file, subjects covered currency exchange rates hedging by mihir a. Hedging currency risks at aifs essay example graduateway.
Currency swaps not only hedge against risk exposure associated with exchange rate fluctuations, but they also ensure receipt of foreign. While the companies revenues are generated in american dollars usd, a large proportion of their costs are incurred foreign currencies such as euros eur and british pounds. Currency, foreign exchange, foreign exchange rates, hedging, travel case settings. While the organizations incomes are produced in american dollars usd, a huge extent of their expenses are brought about remote coinage, for example, euros eur and british pounds gbp. The currency swap market is one way to hedge that risk. Foreign exchange hedging and profit making strategy using. Hedging currency risks at aifs, we shall now address the many stipulations regarding issues such as currency exposure and hedging decisions of the aifs company. A hedge is a type of derivative, or a financial instrument, that derives its value from an underlying asset.
Hedging currency risks at aifs cw supplement harvard. The college division arranges academic years and semesters or summer schools. Such risks are bound to happen in this organization due to their poor hedging policies. The american institute for foreign studies aifs organizes study abroad programs and cultural. For aifs a student exchange organization that offers education and travel programs all over the world the fact that they do business domestically and internationally gives rise to. Tabaczynski uses the currency hedging to secure aifss revenue generating sources and fluctuation of the currency rates. Hedging currency risks at aifs case solution, the american institute for foreign studies aifs organizes study abroad and cultural exchange for american students. Request pdf on researchgate hedging currency risks at aifs subject areas. The essay determines the approximate cost of each alternative and elaborates the reasons for the difference.
Hedging currency risks at aifs excel sheet free essays. If aifs would not have gone for hedging then, company had to take full exposure towards the currency risks which would have ultimately resulted in the loss in dollar denominations if found depreciation in the us dollar. Case synopsis christopher archerlock and becky tabaczynski both work for american institute for foreign study aifs. Financial and operational hedging techniques, sample of term. In order to hedge its foreign exchange exposure, aifs can use an appropriate balance between forward contracts and currency options to achieve the goal. Nisar ahmed siddiqui sukkur iba, sukkur in pursuit of the semester in business administration case study 24 th april, 2017. Vrio analysis for hedging currency risks at aifs case study identified the four main attributes which helps the organization to gain a competitive advantages. We examine 1 taxes, 2 contracting costs, and 3 the impact of hedging policy on the firms investment decisions as explanations of the observed. Exchange hedging and profit making strategy using leveraged spot contracts is no more than 65,000 words in length, exclusive of tables, figures, appendices, references and footnotes. The main feature of this kind of business is the currency mismatch. Hedging currency risk at aifs free download as word doc. Aifs sets guaranteed prices for its exchanges and tours a year in advance, before its final sales figures are known. Hedging currency at aifs essay example graduateway.
This thesis contains no material that has been submitted previously, in whole or in part, for the award of any other academic degree or diploma. Looking at the theory and practices of archerlock within the company, with the information given we shall now analyze and interpret the report of aifs. Financial and operational hedging techniques, sample of. Pdf foreign exchange risk and hedging researchgate. Currency, foreign exchange, foreign exchange rates. Currency exposure or currency risk is the type of risk that an individual or a company faces due to the fluctuation in price of one currency against another. Two common hedges are forward contracts and options.
Assignment on hedging currency risk at aifs submitted by. The american institute for foreign studies aifs organizes study abroad programs and cultural exchanges for american students. Currency exposure is the extent to which the future cash flows of an enterprise, arising from domestic and foreign currency denominated transactions involving assets and liabilities, and generating revenues and expenses, are susceptible to variations in foreign currency exchange rates. Their customers have the possibility to go abroad while the aifs organises the whole trip for them. Hedging currency risks at aifs case solution, hedging currency risks at aifs case analysis, hedging currency risks at aifs case study solution, hedging currency risks at aifs problem statement. Therefore, foreign exchange hedging is important to mitigate the currency risk of aifs. Aifs is an american organization that universal trade chances to both school and secondary school understudies. Hedging currency risks at aifs by elif karaoz on prezi.
Hedging currency risks aifs pdf there are several factors that give rise to currency exposure at aifs. Hedging currency risk at aifs option finance hedge. One of the reasons aifs hedges currency is to protect themselves from. Hedging foreign exchange risk with forwards, futures, options.
With this forward hedge, aifs is completely mitigating the exchange rate risk between the dollar and the euro, and are thus. The high school division organizes 14 week educational travels for students and. Hedging currency risks at aifs 3336 words bartleby. A forward contract will lock in an exchange rate today at which the currency transaction will occur at.
Aifs is an american company that international exchange opportunities to both college and high school students. Hedging currency risks at aifs harvard business school. Further, currency risks are increasingly important as investments become more global. The problem identified in this case is, to determine that which option is best in different scenarios wit. Aifs a student exchange organization that organizes educational and cultural exchange programs throughout the. Harvard business school style case analysis and case presentations european school of business mba 20052010, university of tuebingen 20052012, and heilbronn 2010present. Hedging currency risks at aifs 7 feb10, tues mechanics of futures markets hull, 2008, ch. Aifs sends more than 50,000 students each year on academic and cultural programs worldwide.
Hedging currency risks at aifs case study solution, hedging currency risks at aifs case study analysis, subjects covered currency exchange rates hedging by mihir a. Oct 20, 2019 the currency swap market is one way to hedge that risk. 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. There are several factors that give rise to currency exposure at aifs. Take your hr comms to the next level with prezi video.
Hedging currency risks at aifs case study help case. Answered hedging risks at aifs assignment academicscope. Due to their business model the revenues of the company are. The last two instruments, currency options and currency swaps, will be explained in the next two sections. The currency exposure at aifs can be measured by competitive pricing risk, volume risk, and bottom line risk. Hedging strategies 3 competitive pricing risk hedge against is competitive pricing risk,so aifs guaranteed that rate changes could not affect price. Aifss currency exposure hedging strategies 1 bottomline risk hedging strategies 2 currency exposure or foreign exchange risk. Hedging foreign exchange risk with forwards, futures, options and the gold dinar. On the other hand, if the 100% forwards hedging policy is used and the actual sales are 30,000 units, aifs would benefit from the favorable forward contracts terms, but would be faced with an increase in currency exposure due to the fact that there would be a need to purchase currency at spot rates to cover the deficit in funding. Hedging currency risks at aifs case solution, the american institute of foreign studies faa organizes study abroad and cultural exchange for american students. Hedging currency risks at aifs case solution and analysis. Hedging currency risks at aifs by zachary connolly on prezi. Oct 09, 2017 the currency exposure at aifs can be measured by competitive pricing risk, volume risk, and bottom line risk. A comparison note ahamed kameel mydin meera department of business administration international islamic university malaysia introduction the 1997 east asian currency crisis made apparent how vulnerable currencies can be.
Currency exposure is the extent to which the future cash flows of an enterprise, arising from domestic and foreign currency denominated transactions involving assets and liabilities, and generating revenues and expenses, are susceptible to variations in foreign currency exchange. So currency hedging strategies were used to protect the firm from the exchange rate changes. Request pdf hedging currency risks at aifs subject areas. Hedging currency risk at aifs the american institute for foreign studies aifs organizes study abroad programs and cultural exchanges for american students. American institute for foreign study aifs organizes the educational and cultural exchange programs throughout the world. Foreign currency was bought based on projected sales volumes, which would vary from remaining product sales volumes.
465 430 736 444 84 513 568 661 761 490 675 757 407 933 181 637 593 676 954 835 316 758 1117 566 1376 1143 1378 1280 587 87 1268