Global Marine Partners

8 Pages Posted: 21 Oct 2008

See all articles by Brandt R. Allen

Brandt R. Allen

University of Virginia - Darden School of Business

Robert M. Conroy

University of Virginia - Darden School of Business

Abstract

Not often when one makes a decision are the results so quickly realized! Back in July 1998, when the exchange rate was JPY145 (Japanese yen) to the U.S. dollar, Charles Bobbin, treasurer of Global Marine Partners chose to use currency options to hedge the potential yen exposure created by the signing of an agreement between Global Marine and a major Japanese shipbuilder for the purchase of two new VLCCs (very large crude carriers). Now, with the yen/U.S. dollar rate in the 140 range, the decision seemed to have proved correct. Nevertheless, Bobbin was not in a position to rest on his laurels. A number of people were interested in what should be done now to take advantage of the profit in the option position. One proposal was to sell the existing options and replace them with new ones. Of course, Bobbin could simply keep the options open. He was also concerned about the accounting for these options in view of the Financial Accounting Standards Board's (FASB) new opinion on derivatives.

Excerpt

UVA-F-1243

Rev. June 16, 2009

GLOBAL MARINE PARTNERS

Not often when one makes a decision are the results so quickly realized! Back in July 1998, when the exchange rate was JPY145 (Japanese yen) to the U.S. dollar, Charles Bobbin, treasurer of Global Marine Partners chose to use currency options to hedge the potential yen exposure created by the signing of an agreement between Global Marine and a major Japanese shipbuilder for the purchase of two new VLCCs (very large crude carriers). Now, with the yen/U.S. dollar rate in the 140 range, the decision seemed to have proved correct. Nevertheless, Bobbin was not in a position to rest on his laurels. A number of people were interested in what should be done now to take advantage of the profit in the option position. One proposal was to sell the existing options and replace them with new ones. Of course, Bobbin could simply keep the options open. He was also concerned about the accounting for these options in view of the Financial Accounting Standards Board's (FASB) new opinion on derivatives.

Background

Of the many different areas in which Global Marine operated, the primary ones were Exploring and Producing, Chemicals, and Marketing and Refining. A separate division called Marine served all crude-oil transportation needs for the company.

. . .

Keywords: hedging, accounting, inflation

Suggested Citation

Allen, Brandt R. and Conroy, Robert M., Global Marine Partners. Darden Case No. UVA-F-1243, Available at SSRN: https://ssrn.com/abstract=1279277

Brandt R. Allen (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4842 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/allen.htm

Robert M. Conroy

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/conroy.htm

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