Fx risk hedging at eads

Fx risk hedging at eads

Posted: mikka Date of post: 19.06.2017

Case HBS Case Collection January Revised January Carl Kester , Vincent Dessain and Karol Misztal. In , EADS, the European aerospace group that owns Airbus, was faced with the decision of how best to hedge a large and growing mismatch between its dollar revenues and its euro manufacturing costs. Specifically, the company needed to decide if it would continue hedging primarily with forward contracts, but in much higher volumes and at increasingly unfavorable rates, or to break with past practice and begin using foreign exchange option contracts.

The decision would have consequences for EADS' profitability, cash flow, and its ability to fund strategic investment programs crucial to its ability to remain competitive with Boeing. Students must address questions concerning the proper way to measure foreign exchange exposures, the objectives of a rational risk management policy and program for a company like EADS competing in a duopoly with Boeing, the differences between hedging with FX options versus FX futures, counterparty risk, and hedge accounting, among other considerations.

Carl, Vincent Dessain, and Karol Misztal.

fx risk hedging at eads

Supplement HBS Case Collection March Supplement HBS Case Collection January Revised April Hedging ; options ; commodities ; Credit Derivatives and Swaps ; Risk Management ; Futures and Commodity Futures ; Financial Strategy ; Volatility ;. Case HBS Case Collection February Revised April Case HBS Case Collection January Revised April The Galaxy Dividend Income Growth Fund's Option Investment Strategies.

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fx risk hedging at eads

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Case HBS Case Collection January Revised January FX Risk Hedging at EADS by W. Related Work Supplement HBS Case Collection March FX Risk Hedging at EADS W.

Cite View Details Purchase Related. Case HBS Case Collection January Revised January FX Risk Hedging at EADS W. Carl Kester , Vincent Dessain and Karol Misztal In , EADS, the European aerospace group that owns Airbus, was faced with the decision of how best to hedge a large and growing mismatch between its dollar revenues and its euro manufacturing costs.

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FX Risk Hedging at EADS Case Solution & Analysis- xelenew.web.fc2.com

More from the Author Supplement HBS Case Collection January Revised April Maxum Petroleum, Inc. Carl Kester Maxum seeks an oil-price hedging strategy that yields substantial cash during oil price spikes, is affordable under ordinary circumstances, and is easily managed. It is striving to avoid a repeat of the challenging situation encountered in when spiking oil prices resulted in substantial working capital buildup, heavy draw down in its bank credit lines, and missed investment opportunities.

FX RISK HEDGING AT EADS by annisa swavira on Prezi

Students must differentiate among the income statement, balance sheet and cash flow effects of Maxum's exposure to oil prices, and understand the payoff profiles of various option hedges such as call writing and buying, costless collars, and "ratio writing" unequal combinations of puts and calls. They are also challenged to design a hedging program that supports Maxum's growth and investment strategy by yielding substantial cash primarily during extreme oil price increases; imposes low or no costs otherwise; and does not require active, judgmental trading decisions to execute.

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Case HBS Case Collection February Revised April Maxum Petroleum, Inc. Energy Industry ; Citation: Case HBS Case Collection January Revised April The Galaxy Dividend Income Growth Fund's Option Investment Strategies W.

Carl Kester This case is designed to provide an elementary introduction to options and option pricing for beginning finance students. Analysis of the case requires students to compare the prices of put and call options with various exercise prices and maturity dates on two equities JPMorgan Chase and Facebook that had identical closing stock prices on January 14, but very different volatilities.

These common features and differences enable students to do a series of static comparisons that reveal the impact of a change in one determinant of an option's price while holding other factors constant. The business setting involves a mutual fund board considering the initiation of an option trading strategy to enhance the risk-adjusted performance of the fund and, through covered call writing, to increase earned income that can be used to support cash dividend distributions.

Although the administrative situation is fictional, the data contained in the case are real. The case is best positioned at the beginning of a course module on derivatives and risk management. Harvard Business School Soldiers Field Boston, MA Cite View Details Purchase.

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