Hedging Currency Risks at Aifs

Posted: 30 Sep 2005

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Anders Sjoman

Harvard Business School - Finance Unit; European Research Center

Vincent Dessain

Harvard Business School - Finance Unit; European Research Center

Date Written: February 26, 2005

Abstract

SUBJECT AREAS: Currency, Foreign exchange, Foreign exchange rates, Hedging, Travel

CASE SETTINGS: London; Education industry; Travel industry; $200 million; 100 employees; 2004

The American Institute for Foreign Studies (AIFS) organizes study abroad programs and cultural exchanges for American students. The firm's revenues are mainly in U.S. dollars, but most of its costs are in eurodollars and British pounds. 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.harvard.edu.

Suggested Citation

Desai, Mihir A. and Sjoman, Anders and Dessain, Vincent, Hedging Currency Risks at Aifs (February 26, 2005). HBS Publishing Case No.: 9-205-026; Teaching Note No.: 5-206-025. Available at SSRN: https://ssrn.com/abstract=817165

Mihir A. Desai (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Anders Sjoman

Harvard Business School - Finance Unit; European Research Center ( email )

Boston, MA 02163
United States

Vincent Dessain

Harvard Business School - Finance Unit; European Research Center ( email )

Boston, MA 02163
United States

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