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Hedging Currency Risk at TT Textiles Case Solution & Answer

This case highlights the impact of exchange rate changes on the profitability of a textile manufacturing company TT textiles export oriented. In the context of the economic crisis of 2007-08, where we expect the Indian Rupee (INR) to enjoy an unprecedented 35 USD / INR United States, the Company entered into a swap agreement based on historical stability Swiss Franc (CHF) against U.S. dollar (U.S. $). At that time, the incident seemed relatively safe and lucrative. But once the global financial crisis hit in 2008, began to make significant losses in market value. The unexpected behavior of the exchange rate was perplexed supposed balance between the U.S. and $ CHF. Fortunately, things changed in 2009 and TT Textiles was no longer in the red. However, there was uncertainty about the future. In March 2009, three months remaining in the contract, Sanjay Jain, CEO, is faced with the dilemma of whether to stop now or hold the case until maturity.
by
Rajesh Chakrabarti
Source: Indian School of Business
15 pages.
Date Posted: February 15, 2013. Prod #: ISB009-PDF-ENG
Currency hedging TT Textiles Case Solution

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