In 2008, the European aerospace group that possesses Airbus, EADS, was faced with the choice of how best to hedge a substantial and growing mismatch between its euro production prices and its dollar sales. Specifically, the business needed to determine if it would continue hedging mostly at negative rates, but in much higher volumes and with forward contracts, or to break with previous practice and begin using foreign exchange option contracts.
fx risk hedging at eads case solution
The selection would have consequences for EADS' profitability, income, and its ability to finance strategic investment plans fundamental to its ability to stay competitive with Boeing. Pupils must address questions concerning the proper way to measure foreign exchange exposures, the objectives of a rational risk management policy and plan for a company like EADS competing in a duopoly with Boeing, the differences between hedging with FX options versus FX futures, counterparty risk, and hedge accounting, among other factors.
PUBLICATION DATE: January 16, 2013 PRODUCT #: 213080-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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