Lufthansa
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What went wrong?:
What went wrong? Lufthansas board should have chosen DM1.6 b as a benchmark (DM3.2/$) Herr Ruhnau expected the dollar to fall; hence, he should have used option hedging
Concept check #1:
Concept check #1 If you believe there is a 80% probability that your house will be destroyed by floods, would you buy insurance or move to another location?
Concept check #2:
Concept check #2 You want your exams to be assessed based on: a. a pre-determined, objective exam key b. instructors inspiration at the time of grading
Conclusions:
Conclusions Expect the exchange rate to move against you? Use forward hedging. Expect the exchange rate to move in your favor? Use option hedging. The benchmark has to be ex-ante not ex-post.
What went wrong?:
What went wrong? Lufthansas board should have chosen DM1.6 b as a benchmark (DM3.2/$) Herr Ruhnau expected the dollar to fall; hence, he should have used option hedging
What went wrong?:
What went wrong? Lufthansas board should have chosen DM1.6 b as a benchmark (DM3.2/$) Herr Ruhnau expected the dollar to fall; hence, he should have used option hedging
Concept check #1:
Concept check #1 If you believe there is a 80% probability that your house will be destroyed by floods, would you buy insurance or move to another location?
Concept check #2:
Concept check #2 You want your exams to be assessed based on: a. a pre-determined, objective exam key b. instructors inspiration at the time of grading
Conclusions:
Conclusions Expect the exchange rate to move against you? Use forward hedging. Expect the exchange rate to move in your favor? Use option hedging. The benchmark has to be ex-ante not ex-post.
Concept check #1:
Concept check #1 If you believe there is a 80% probability that your house will be destroyed by floods, would you buy insurance or move to another location?
Concept check #2:
Concept check #2 You want your exams to be assessed based on: a. a pre-determined, objective exam key b. instructors inspiration at the time of grading
Conclusions:
Conclusions Expect the exchange rate to move against you? Use forward hedging. Expect the exchange rate to move in your favor? Use option hedging. The benchmark has to be ex-ante not ex-post.