HEDGING CURRENCY RISKS AT AIFS PDF

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The College Division arranges academic years and semesters or summer schools. The High School Division organizes week educational travels for students and teachers.

AIFS receives most. AIFS a student exchange organization that organizes educational and cultural exchange programs throughout the world. Founded in the U. Companies dealing with foreign currencies are at a risk of significant losses caused by fluctuations in the exchange rates. The company incurs its expenses in dollars but.

The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1 the impact of foreign exchange FX rates on the return and risk of international investments, and 2 the impact of having more assets on the return and risk of the.

In the event of the above risks, Tabaczynski considers three alternative. What gives rise to the currency exposure at AIFS? Summary AIFS is an American based company that offers travel abroad and exchange study services to both college and high school students.

Consequently, foreign exchange hedging has a crucial importance for the company because it provides protection against different types of risk that derive from its activity. In order to reduce risk, the company is using two hedging derivatives: forward contracts and put options to sell dollars. The aim of the paper is to determine an appropriate hedging policy which answers two main questions: how much to hedge, and in what proportions of forwards …show more content… Then, we took into consideration only a fluctuation of the exchange rate.

Different coverage of costs with hedging was also introduced in the analysis. Exhibit 3 But, even though the possibility of winning exists, the company is exposed to a greater risk if it does not hedge. Moreover, the policy of the company is to ensure against the risk, not to speculate on the foreign exchange market. We can observe that the currencies are exposed to high volatility, which means the company may register greater risk.

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Hedging Currency Risk at Aifs

Desai , Vincent Dessain and Anders Sjoman. The firm's revenues are mainly in U. The company's controllers review the hedging activities of AIFS. AIFS has a hedging policy, but the controllers want to review the percentage of exposure that is covered and the use of forward contracts and options. AIFS sets guaranteed prices for its exchanges and tours a year in advance, before its final sales figures are known. The controllers need to ensure that the company adequately hedges its foreign exchange exposure and achieves an appropriate balance between forward contracts and currency options. To obtain executable spreadsheets courseware , please contact our customer service department at custserv hbsp.

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Hedging Currency Risk at AIFS

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