In 1985, the Walt Disney Company undertook an intriguing global financing deal. In a single chain of transactions involving parties based in New York, Paris and Tokyo, Disney simultaneously raised funds in USD, partially hedged a JPY royalty stream, and became the first US corporation to issue a sinking-fund ECU bond in the Euromarket. This case demonstrates the financing flexibility available to corporate treasurers sourcing funds on a global scale and shows also how currency swaps can be used as a hedging technique.

1. Should Disney hedge its JPY royalty cash flow? Explain. If so, how much should be hedged and over what time frame?