Aifs has a hedging policy but the controller wants to check the amount of exposure that is covered and the use of futures and options aifs sets guaranteed prices for their stock exchanges and tours a year in advance, are known before its final sales figures. Hedging currency risk at aifs: assignment questions: q what gives rise to the currency exposure at aifs a aifs is a company that specializes in providing educational and cultural exchange programs for college and. Aifs currency hedging system hedging refers to a risk investment strategy used to safeguard against risk due to changes in the price of assets or currency exchange rate aifs used hedging to protect itself against constant changing exchange rate between the dollar and the euro.
Foreign currency transactions and hedging - hedging currency risk at aifs case 1 what gives rise to the currency exposure at aifs 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. 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 desai, anders sjoman, vincent dessain source: hbs premier case collection 17 pages. Hedging currency risks at aifs case solution introduction american institute for foreign study (aifs) organizes the educational and cultural exchange programs throughout the world. Step 8: generating alternatives for hedging currency risks at aifs case solution: after completing the analyses of the company, its opportunities and threats, it is important to generate a solution of the problem and the alternatives a company can apply in order to solve its problems.
homework: foreign currency transactions and hedging - hedging currency risk at aifs case what gives rise to the currency exposure at aifs 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. Hedging currency risks at aifs agenda american institute for foreign studies (aifs) founded in the us in 1964 by sir cyril taylor more than 50,000 students each year for exchange programs worldwide. 45 million dollars will be soldthe case with option hedging 100% sales volume variation recommendation hedging currency risks at aifs 1 the optimal amount of expenses would be 1000 euros per student there is 25 million euros in underlying exposure.
Hedging currency risk at aifs essay summary aifs is an american based company that offers travel abroad and exchange study services to both college and high school students while aifs's revenues are denominated in american dollars (usd), most of their costs are in foreign currencies as euros (eur) and british pounds (gbp. Hedging currency risks at aifs hedging currency risks at aifs delta hedging technique at dayton manufacturing foreign exchange hedging strategies at general motors madesco inc hedging currency risk at tt tex delta hedging at dayton manufacturing dozier industries hedging assignment. Hedging currency risks at aifs problem statement: the problem identified in this case is, to determine that which option is best in different scenarios with respect to the fluctuation in exchange rates. More essay examples on currency rubric 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. Hedging currency risks at aifs 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.
Hedging currency risks at aifs with regard to the share of deal and possibilities specified in every single level, carrying the expense of solutions is included in the calculated price tag in all three columns, mainly because it will give the clearest see of the problem at that time. The organziation's managers look at the hedging behavior of aifs aifs has a stated hedging rule, but the managers seek to reassess the percentage of exposure that is taken care of and the utilization of forward deals and options. Hedging currency risk at aifs case synopsis: the american institute for foreign study (aifs) is a student exchange organization based in london through its companies, aifs is responsible for sending 50,000 students on international exchanges annually with yearly revenues of about $200,000. Case solution the american institute for foreign studies (aifs) organizes study abroad programs and cultural exchanges for american students the firm's revenues are mainly in us dollars, but most of its costs are in euro dollars and british pounds.
27, 2013 hedging currency risks at aif the american institute of foreign studies (aifs) is a company that organizes student exchange programs worldwide with two main divisions the college division arranges academic years and semesters or summer schools.
In order to hedge its foreign exchange exposure, aifs can use an appropriate balance between forward contracts and currency options to achieve the goal the case with no hedging if the exchange rate remains constant at $122/euros then aifs will not incur a foreign exchange loss or a gain.
Aifs uses two different pricing decisions for the college and high school travel divisions both programs take into account their cost base, competitive pricing and the hedging activities the college division worked from july 1 to june 30, or the academic planning year. In order to limit or eliminate this risk, aifs has to hedge their currency exposure at the moment the company hedges 100% of their exposure using forward contracts and currency options. Hedging currency risks at aifs case solution, the american institute of foreign studies (faa) organizes study abroad and cultural exchange for american students the revenues of the company are mainly.