svroz015 Click Window To Start Print 75 Chapter Seven Case Studies ere arc a few fictitious examples of derivatives in action. They illustrate a variety of circumstances from where positions may need to be hedged to situations where a trader may see a profit opportunity. The Large International Company Treasurer These days, for a great many organisations the world is one big market. However, this creates not simply problems of differing trade practices and cultures, but those surrounding the currency in which an organisation is paid for the work it does, because it may have to pay for that work in a different currency. So, in addition to all the other balancing acts that the Treasurer has to carry out, matching loans with liabilities, managing overnight positions and the like, the hedging of currency takes on major importance. For example, imagine an international car company based in the U.K. receives an order for 500 motorcars at $20,000 each, to be delivered in 12 months time. At first the board of the company rejoice at the idea of a $10 million order, but the prudent Treasurer points out the risks that such an order could in fact make the company go bankrupt! Say at the time of striking the deal that the exchange rate is $1.20 to the £1, This means that the order is worth £8.33 million, or £16,666 per car. The company calculate that each Risk hapiMewer publish. com vewerlserieo!7780768978529000701106887875288895061116765H0816161/75192Ix eden ne