Case Study: Piermont, Inc.

Paper Summary:

This is a case study of Piermont, Inc. which includes an analysis of the advantages and disadvantages of FX hedging. The author explains what is hedging, whether to hedge and which hedging instrument a company, like Piermont, might use in a specific scenario and why. The paper considers the impact of FX volatility on Piermont's revenues and profits.

From the Paper:

"Relatively small companies, such as Piermont, often overlook the foreign exchange rate risks associated with foreign currency exposures. Currency volatility can be underestimated because it is not always recognized as a primary consideration or a serious risk for a company. such as Piermont. which is becoming involved in exporting for the first time. However, the impact of overlooking foreign currency exposures by not hedging can have a significant negative effect on profits for Piedmont. For example ,based on the spot exchange rate, ..."

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