This assignment has an objective to practice an implementation of hedging techniques in a real life setting based on available market information.
To complete this assignment the writer needs to choose a company with a specific transaction exposure, which could be related to a transaction in foreign currency, or to a commodity company produces or consumes.
Given the circumstances of the company (availability and cost of funding, value of the exposure), market information (interest rates, futures and option contracts), the writer needs to design strategies for hedging the given transaction exposure using the forward/futures markets, money markets and option markets, as well as analyse possible risks of leaving the exposure not hedged. The analysis should also include the comparison of the overall cost of hedging options.
The information about a company and its exposures could be found from recent news such as acquisitions or disposals of assets by a company; financial reports (you can check sections where company states risk factors such as foreign currency or commodity price risks), or any other credible course. Please choose the transaction in the markets where short/long term interest rates, futures and option prices are available from pubic sources.
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