The book is called Multinational Business Finance edition 14 By Eiteman, Stonehill, and Moffett (Chapter 7 mini case questions)

1. What were the expectations - and the fears - of the South Korean exporting firms that purchase the KiKos?

2. What is the responsibility of a bank that is offering and promoting these derivative products to its customers? does it have some duty to protect their interests? who do you think was at fault in this case?

3. If you were consultant advising firms on their use of foreign currency derivative products, what lessons would you draw from this case, and how would you communicate that to your clients?

I need help answering all of this questions.

MINI-CASE KiKos and the South Korean Won? That possibility from a fundamental tenet of inter- hedging needs became the sale and promotion of Knockk national law that is not written down in any law book In Knock-out option agreements (KiKos). extremis, the locals win. "Bad Trades, Except in Korea by Floyd Norris, oq Knock-in Knock-outs (Kikos) South Korean The New York Times, April 2,2009 Many South Korean manufacturers had suffered falling mar not exporters in 2006, 2001 and into 2008 were on sales for years. Already operating in highly competi particularly happy with gins markets the appreciation of the won had cut further and exchange rate trends. The tive South Korean won (KRW) had been appreciating, slowly further into their margins after currency settlement.Asseenin but steadily, for years against the US. dollar. This was a Exhibit A, the won had traded in a narrow range for years But major problem for Korean manufacturers, as much of their that was little comfort as the difference between KRW100 sales was exports to buyers paying in U.S. dollars. As the and KRW 930 to the dollar was a big chunk of margin. dollar continued to weaken, each dollar resulted in fewer South Korean banks had started promoting KiKos and fewer Korean won and nearly all of their costs were as a way of managing this currency risk. The Knock-In in Korean won. Korean banks, in an effort to service these Knock-out (KiKo) was a complex option structure, which 2Copyright co2015Thunderbird School of Global Management, Arizona State University. All rights reserved. This case was prepared Professor Michael H. Moffett for the purpose of classroom discussion only