Koi financial statement
3. Evaluate GM’s currency hedging policies. [3 pages] {Gavin} {Ryan} The issue here may lie with the 50% to 75% hedge as it is doubtful as to why GM does not hedge its receivables / payables by 100%. Perhaps the issue is related to high costs of using options and their receivables / payables run into huge amounts. Additionally, GM is not keen on committing to a forward because they have positive expectations about the future exchange rate and the forward would only serve to limit their possible gains.
Inherency: Does the plan exist in the status quo (the way things are now), and what structural or attitudinal barriers exist?
Solvency: Does the affirmative plan solve the problem? Topicality: Does the affirmative plan meet the terms of the resolution? Is it an example of the resolution?
What are they trying to achieve it, and have they achieved it?
Forwards, Options, Delta Hedging. ANALYZE ALL! Is the 50% hedging suitable? Largest possible loss. Value at risk?
Costs of policies and policy action.
Risk-averseness (50% issue - why not more or less)
Compare against Big 4 as to what other policies/methodology they use
It’s good for sure but how can they improve on it?
4. If GM does deviate from its formal policy for its CAD exposure, then how should GM think about whether to use forwards or options for the deviation from the policy? [2 pages] [deviation: it’s the 50-75% change in hedge ratio] {Ryan} {Jason}
In order to determine whether to use forwards or options, it depends on a number of issues such as GM’s expectation on future spot rates and also their management’s level of risk adverseness. If GM wants to hedge
Inherency: Does the plan exist in the status quo (the way things are now), and what structural or attitudinal barriers exist?
Solvency: Does the affirmative plan solve the problem? Topicality: Does the affirmative plan meet the terms of the resolution? Is it an example of the resolution?
What are they trying to achieve it, and have they achieved it?
Forwards, Options, Delta Hedging. ANALYZE ALL! Is the 50% hedging suitable? Largest possible loss. Value at risk?
Costs of policies and policy action.
Risk-averseness (50% issue - why not more or less)
Compare against Big 4 as to what other policies/methodology they use
It’s good for sure but how can they improve on it?
4. If GM does deviate from its formal policy for its CAD exposure, then how should GM think about whether to use forwards or options for the deviation from the policy? [2 pages] [deviation: it’s the 50-75% change in hedge ratio] {Ryan} {Jason}
In order to determine whether to use forwards or options, it depends on a number of issues such as GM’s expectation on future spot rates and also their management’s level of risk adverseness. If GM wants to hedge