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Case 3.1: Foreign Exchange Trading At Baldwin Enterprise

Case 3.1: Foreign Exchange Trading At Baldwin Enterprise. Bjarne Berg Bong-Keun Jeong. Background. A manufacturing company operated in several countries Maintain cash assets: US dollar (USD), Euro (EUR), Pound (GBP), Hong Kong dollar (HKD), and Japanese yen (JPY)

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Case 3.1: Foreign Exchange Trading At Baldwin Enterprise

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  1. Case 3.1: Foreign Exchange Trading At Baldwin Enterprise Bjarne Berg Bong-Keun Jeong

  2. Background • A manufacturing company operated in several countries • Maintain cash assets: US dollar (USD), Euro (EUR), Pound (GBP), Hong Kong dollar (HKD), and Japanese yen (JPY) • To meet the different cash flow requirements, Baldwin often moves funds one place to another through the foreign exchange (FX) market

  3. Background • The FX market buy and sell different currencies (same as stock market) • Bid price: the price that market is willing to buy a particular currency • Ask price: the price that market is willing to sell • Ask price > bid price (transaction profit/cost)

  4. Current FX Rates at Baldwin One GBP (pound)  1 * 1.5593 USD (US dollar)  1 * 1.5593 * 0.6409 = 0.999355 (pound)

  5. Transaction Cost

  6. Problem Statement Objective: Design a currency trading plan that minimize transaction costs Requirements

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