2) At that time, Lufthansa and Heinz had several foreign exchange management schemes: 1 No risk avoidance scheme;
2. Hold it until the payment date. Part 3 adopts the method of avoiding risks, and the other part lets itself drift; 4. Adopting the method of foreign exchange options;
Buy dollars now and hold them until the payment date. We don't know the final cost of each scheme in advance, because the final result of each scheme is closely related to the future exchange rate changes. Several schemes have their own advantages and disadvantages; Although Heinz also believes that the US dollar will fall in the coming year, he believes that if foreign exchange positions are not avoided at all, it will bring great risks to the company. So he chose a partial hedging strategy, and he chose to use forward foreign exchange contracts for 50% of foreign exchange positions.
The other 50% did not do any risk management. This can not only avoid the risk of adverse changes in foreign exchange, but also partially enjoy the benefits of favorable changes in foreign exchange. Heinz's most important method has both right and wrong sides. His prediction 100% is true. The dollar kept falling in the following months until 1986 began. In fact, the dollar is not only getting weaker, but also diving sharply. To 1986, 1, the spot exchange rate of the market fell to 1 to 2.3. The spot price in this market is undoubtedly very beneficial to the company. The bad news is that the total cost of hedging 50% foreign exchange position is DM 65.438+37.5 million, which is DM 225 million more than that without hedging and DM 65.438+29 million more than that with foreign exchange option contract. Tell him Heinz made four mistakes, but his behavior is wrong and he can't completely refuse.