The following situations represent different types of FX exposure. Please identify the exposure in each case if any as a balance sheet exposure involving translation risk, income exposure involving transaction risk or operating exposure involving the firm's long-term business activities. Then in each case identify the specific types of hedge the firm should use if any to hedge that exposure from the following list: forward, future, option, swap, money market [borrow and convert], netting, FDI. In some cases, you may need to use a combination of these to fully hedge the exposure. If no hedge is needed explain why. a) Citibank issues a US$ CD to fund a loan to Novartis in Danish Kroner; b) Swatch whose home currency is SF sells watches priced in US$ to its US dealers on 90-day terms; c) Toyota invests in a $3 billion expansion of Kentucky plant by converting Yen loan to $; d) Walmart expects a dividend payment in pesos every quarter in 2020 from its Mexican subsidiary; e) Jet Blue has contracted to buy Euro 5 billion in planes spread over 6 years with first delivery beginning in 2 years; f) Intel is looking to expand global production and believes the Indian rupee is not correlated with its other production locations; 8) Apple has ordered $50 million in watches on 60-day terms from China denominated in Yuan; h) American Express pays a US tourist's hotel bill in SF and will receive a $ credit card payment in 30- days; i) Hilton Hotels borrows 100 million pounds from a UK bank to renovate its hotel in London, England; j) Hilton expects that both tourists and UK residents will pay by credit card The following situations represent different types of FX exposure. Please identify the exposure in each case if any as a balance sheet exposure involving translation risk, income exposure involving transaction risk or operating exposure involving the firm's long-term business activities. Then in each case identify the specific types of hedge the firm should use if any to hedge that exposure from the following list: forward, future, option, swap, money market [borrow and convert], netting, FDI. In some cases, you may need to use a combination of these to fully hedge the exposure. If no hedge is needed explain why. a) Citibank issues a US$ CD to fund a loan to Novartis in Danish Kroner; b) Swatch whose home currency is SF sells watches priced in US$ to its US dealers on 90-day terms; c) Toyota invests in a $3 billion expansion of Kentucky plant by converting Yen loan to $; d) Walmart expects a dividend payment in pesos every quarter in 2020 from its Mexican subsidiary; e) Jet Blue has contracted to buy Euro 5 billion in planes spread over 6 years with first delivery beginning in 2 years; f) Intel is looking to expand global production and believes the Indian rupee is not correlated with its other production locations; 8) Apple has ordered $50 million in watches on 60-day terms from China denominated in Yuan; h) American Express pays a US tourist's hotel bill in SF and will receive a $ credit card payment in 30- days; i) Hilton Hotels borrows 100 million pounds from a UK bank to renovate its hotel in London, England; j) Hilton expects that both tourists and UK residents will pay by credit card
