Hedging Currency Risks At AIFS
PLEKHANOV RUSSIAN ECONOMIC UNIVERSITY
INTERNATIONAL FINANCIAL MANAGEMENT
Case Study REPORT
Hedging Currency Risks
At AIFS
Professor: Yulia Y.Finogenova
Performed by: Budeanu Diana Gabaydullin Ilnar Kulikova Ekaterina Malev Mikhail Content:
Introduction and problem statement…………….
Identification of major risk factors:
Risk assessment.......................................................... Map of risks.......................................................... SWOT..........................................................
Hedging Scenarios:
1. Should AIFS hedge at all?.......................................................... 2. Proportions of the expected costs that should be covered….. 3. Proportions of forwards and options use……………………..
Introduction and problem statement
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. The High School Division organizes 1-4 week educational travels for students and teachers. More than 50,000 students participate each year in exchange programs of AIFS, which leads to annual revenues of around $ 200 million. AIFS receives most of its revenues in US-Dollars, whereas most of its costs incur in foreign currencies, mainly in Euros and British Pounds. This is why they use currency hedging in order to protect their bottom line and to deal with the following risks: - Changes in exchange rates could increase the cost base. - They buy foreign currency based on a projected sales volume, because they don´t know
INTERNATIONAL FINANCIAL MANAGEMENT
Case Study REPORT
Hedging Currency Risks
At AIFS
Professor: Yulia Y.Finogenova
Performed by: Budeanu Diana Gabaydullin Ilnar Kulikova Ekaterina Malev Mikhail Content:
Introduction and problem statement…………….
Identification of major risk factors:
Risk assessment.......................................................... Map of risks.......................................................... SWOT..........................................................
Hedging Scenarios:
1. Should AIFS hedge at all?.......................................................... 2. Proportions of the expected costs that should be covered….. 3. Proportions of forwards and options use……………………..
Introduction and problem statement
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. The High School Division organizes 1-4 week educational travels for students and teachers. More than 50,000 students participate each year in exchange programs of AIFS, which leads to annual revenues of around $ 200 million. AIFS receives most of its revenues in US-Dollars, whereas most of its costs incur in foreign currencies, mainly in Euros and British Pounds. This is why they use currency hedging in order to protect their bottom line and to deal with the following risks: - Changes in exchange rates could increase the cost base. - They buy foreign currency based on a projected sales volume, because they don´t know