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E=12635&R=286118PDF-ENG&conversationId=1967043
J.C. Penney (B)
Scott P. Mason, William B. Allen

Teaching Note

Educator Copy

Revision Date:
Jun 20, 1986
Publication Date:
Apr 17, 1986
Discipline:
Finance
Source:
Harvard Business School

Product number:

English PDF

286118-PDF-ENG
Length:
21p

Also Available in:

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DESCRIPTION

Penney's assistant treasurer was considering various capital markets issues to finance store
modernizations. This case provides the financing terms available to Penney for domestic, current,
and zero coupon debt. Eurodollar debt, and nondollar SFr and Yen issues hedged and swapped
back to dollar liabilities. Also, Penney is considering using interest rate futures, options, and options
on futures to hedge a forthcoming debt issue.

http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?E=12784&R=286109PDF-ENG&conversationId=1967043
Applications for Financial Futures
Scott P. Mason, Sally E. Durdan

Teaching Note

Educator Copy

Revision Date:
Jul 28, 1986

Product number:
286109-PDF-ENG

Publication Date:
Mar 28, 1986

Length:
23p

Discipline:
Finance
Source:
Harvard Business School
Also Available in:

English Hardcopy Black & White

English PDF

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DESCRIPTION

Consists of a series of four brief descriptions of the use of financial futures as hedging vehicles: a
savings and loan hedging the rollover of three-month money market certificates with T-bill futures, a
corporate debt issuer hedging the cost of a future debt issue with T-bond futures, an equity investor
hedging a decline in the market, and an example of a company with a natural interest rate hedge on
its balance sheet. The examples describe the details of T-bill, T-bond, and S&P 500 stock index
futures. Issues addressed include variation margin and basis risk (due to differences in the
securities underlying the cash and futures positions, changes in the carry, etc.).

http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?E=77272&R=UV0738PDF-ENG&conversationId=1967043
Baker Adhesives
Marc Lipson

Teaching Note

Educator Copy

Revision Date:
Oct 19, 2010

Product number:

English PDF

UV0738-PDF-ENG
Publication Date:
Jan 25, 2007

Length:
6p

Discipline:
Finance
Source:
Darden School of Business
Also Available in:

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DESCRIPTION

This is a Darden case study.


A small adhesives company faces exchange-rate risks as it makes its first foray into international
sales. The receipt of payment from an unhedged foreign currency denominated past sale illustrates
potential currency risks while a potential follow-on order provides a context to discuss potential
hedges. Additional richness is provided by the fact that the follow-on sale appears unprofitable
unless the analysis acknowledges the irrelevance of overhead and that the market value of raw
materials is below book value.

http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?E=76506&R=UV0018PDF-ENG&conversationId=1971386

Delta Beverage Group, Inc.


Kenneth Eades

Teaching Note

Educator Copy

Revision Date:
Jan 10, 2000

Product number:

English PDF

UV0018-PDF-ENG
Publication Date:
Oct 13, 1997

Length:
20p

Discipline:
Strategy
Source:
Darden School of Business
Also Available in:

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DESCRIPTION

This is a Darden case study.


Delta Beverage is facing severe cost control problems. In addition to the high interest expense, the
cost of aluminum cans and PET containers has risen substantially during the past year. Students
must decide whether the CFO should hedge aluminum to avoid the risk of violating a loan covenant.
Learning Objective:

To analyze the risk of a decision and take action.


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CASES

Grupo Sidek (A)


Kenneth A. Froot, Alberto Moel

Revision Date:
Jul 14, 1997

Educator Copy

Product number:
297022-PDF-ENG

Publication Date:
Sep 17, 1996
Discipline:
Finance
Source:

Length:
21p

English PDF

Harvard Business School


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A large Mexican conglomerate, active in tourism, real estate, and steel, is faced with difficult
macroeconomic conditions beginning with the Peso crisis of December 1994. The conglomerate
had extensive dollar-indexed liabilities and was caught in a crunch when the Mexian Peso lost half
its value against the dollar in late 1994. Even though a large portion of its revenues were also
dollar-indexed, thus ostensibly providing a foreign exchange hedge, most of the conglomerate's
customers were Mexican nationals. With the ensuing recession in 1995, the revenue base dried up,
but the dollar liabilities were still outstanding. The case covers the period from late 1994 to February
1995 and deals with the financial and operational decision that Sidek had to face at that time.
Learning Objective:

To demonstrate the effect of foreign exchange and macroeconomic volatility on the real and
financial assets and liabilities of a company with large foreign exchange and economic exposure.
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Foreign Exchange Market, Background Note and Problem Set
W. Carl Kester, Richard P. Melnick

Teaching Note

Educator Copy

Revision Date:
Sep 05, 1991

Product number:
287033-PDF-ENG

Publication Date:
Feb 23, 1987

Length:
12p

Discipline:
Finance
Also Available in:

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DESCRIPTION

English PDF

Discusses the background of the foreign exchange market. This includes information about the
participants and how the market operates. The problem set verses students in the arithmetic in the
many common foreign exchange problems such as calculating forward premium and discounts,
determining hedge ratios, covered interest arbitrage, etc

http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?E=9135&R=205074PDF-ENG&conversationId=1973174
Advising on Currency Risk at ICICI Bank
George Chacko, Marti G. Subrahmanyam, Vincent Dessain, Anders Sjoman
Educator Copy

Revision Date:
Feb 21, 2006

Product number:

English PDF

205074-PDF-ENG
Publication Date:
Mar 22, 2005

Length:
16p

Discipline:
Finance
Source:
Harvard Business School
Also Available in:

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DESCRIPTION

In March 2003, a client approached the Markets Advisory Group at ICICI Bank, India's second
largest bank, about a hedging transaction. The hedge involved multiple interest rates and
currencies. Shilpa Kumar, head of the Markets Advisory Group, has to put together a
recommendation for the client. She can choose from a number of financial instruments, including
swaps, options, and futures contracts on interest rates and currencies, in her recommendation.
Learning Objective:

To learn how to apply knowledge of financial derivatives such as options, futures, and swaps in a
practical situation: a hedging decision by a corporation.

http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?E=1748&R=108038PDF-ENG&conversationId=1976352
Wal-Mart's Use of Interest Rate Swaps
Michael D. Kimbrough, Michael Faulkender, Nicole Thorne
Jenkins, Rachel Gordon
Educator Copy

Revision Date:

Product number:

English PDF

Jul 22, 2010


Publication Date:
Jan 17, 2008

108038-PDF-ENG
Length:
22p

Discipline:
Finance
Source:
Harvard Business School
Also Available in:

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DESCRIPTION

"Wal-Mart's Use of Interest Rate Swaps" recounts Wal-Mart's use of interest rate swaps to hedge
the fair value of its fixed-rate debt against changing interest rates. This case provides students with
a foundation for understanding the use of and accounting for more complex derivatives. Specific
issues raised include: (1) the financial statement impact of hedge accounting, (2) motivations for
using derivatives, including the potential role of accounting standards, and (3) the degree to which
financial statement and MD&A disclosures are sufficiently informative about the risks associated
with financial instruments.
Learning Objective:

Provide students with an understanding of the uses and accounting for interest rates swaps and
more complex derivatives.
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E=1203156&R=908N13-PDF-ENG&conversationId=1977520
Pixonix Inc. - Addressing Currency Exposure
Colette Southam, Karim Moolani

Teaching Note

Educator Copy

Publication Date:
Jun 05, 2009

Product number:
908N13-PDF-ENG

Discipline:
Finance

Length:
4p

Source:
Richard Ivey School of Business
Foundation
Also Available in:

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DESCRIPTION

The chief financial officer of Pixonix Inc. is trying to decide if she should hedge, given the current
strength of the Canadian dollar. Her company licenses proprietary software through a U.S. company
that will cost $7.5 million in three months time. The case provides the students with the opportunity
to understand the impact of exchange rate fluctuations on her firm's cash flows and some of the
instruments available to manage risk, including puts and calls and forward contracts.
Learning Objective:

This introductory case will allow students to: Understand and quantify risks (revenue and costs)
associated with exchange rate fluctuations Understand some of the instruments available to
manage risk, including puts and calls and forward contracts. This case is intended for an
introductory finance class or as an early case in a class on derivatives or international finance. No
prior knowledge of options and forward contracts is needed to undertake the case.

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