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Institute of Public Enterprise

(Osmania University Campus, Hyderabad) PGP: III Semester Risk Management and Derivatives Assignment for Internal Assessment Written Case Analysis: LUFTHANSA: TO HEDGE OR NOT TO HEDGE Date: 04/09/2012 Last Submission Date: 12/10/2012 General Instructions 1. All questions are compulsory which are based on the LUFTHANSAs Case 2. Answer the questions in the space provided. Name: Roll Number: 1. What is the Foreign Exchange Risk faced by the LUFTHANSA?

2. What alternatives did Lufthansas CEO was considering and why?

3. According to you how each individual alternative to hedge the possible foreign

exchange risks may be beneficial or not beneficial to the company?

4. Why the Lufthansas CEO was considering to hedge a part of the purchase price?

5. If you were in Lufthansas CEO position which hedging strategy you would have chosen and why?

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