Identify three scenarios similar to the above example and provide
This week you examined various types of derivatives that firms can utilise for the purpose of transferring risk. For this assignment, you will need to evaluate different scenarios and explain which types of derivatives would be most appropriate.
Given the possible locations, corporate structures, and risk types outlined below, identify three scenarios and analyse the type of derivative product that best fits the situation.
Location
A developed area, eg africa
A developed area
eg Europe
An area that is developed & continue to developed eg Asia
Corporate structure
Standalone firm
A major operating subsidiary
A medium sized entreprenearial endeavour
Types of risk Transfered
Foreign exchange risk
Interest rate risk
Operational delievery between countries
As an example, you might want to analyse a standalone (corporate structure) manufacturing European (location) company that exports to the US and wants to hedge foreign exchange (FOREX) risk (type of risk). What type of derivative product would best fit this scenario? Why?
Identify three scenarios similar to the above example and provide a detailed response for each that recommends a derivative and explains why that type might be the most appropriate.
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