This case is about RISK MANAGEMENT
PUBLICATION DATE: March 31, 2004
Global Marine Partners Case Solution
Not often when one makes a decision are the results quickly realized! Back in July 1998, when the exchange rate was JPY145 (Japanese yen) to the U.S. dollar, Charles Bobbin, treasurer of Global Marine Partners selected to use currency options to hedge the possible yen exposure created by the signing of an agreement between Global Marine and a leading Japanese shipbuilder for the purchase of two new VLCCs (very large crude carriers). Now, with the yen/U.S. dollar rate in the 140 range, the conclusion appeared to have proved right.
Nevertheless, Bobbin wasn’t in a position to rest on his laurels. A number of individuals were interested in what should be done now to make the most of the gain in the option place. One suggestion was to sell the existing options and replace them with new ones. Naturally, Bobbin could simply keep the options open. He was also concerned about the accounting for these options in view of the Financial Accounting Standards Board’s (FASB) new opinion on derivatives.
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