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What is AIFS Currency Risk Hedging Analysis about?

1. The American Institute for Foreign Studies (AIFS) faces currency risk because its revenues are in U.S. dollars but most costs are in euros, and it sets prices a year in advance. Fluctuations in the dollar/euro exchange rate can negatively impact profits. 2. With no hedging and a sales volume of 25,000, a stronger dollar would cause a $4.39 million loss, while a weaker dollar would produce a $5.20 million gain. 3. A 100% forward hedge fixes the exchange rate, eliminating risk but also limiting gains.

Author

Tanmay Mehta

Language

EN