Hedging Transactions Involving Foreign Exchange Risk – A Primer: Falling in Love with a Puerto Vallarta Condo (Part A)

© 2015 Prof. Farok J. Contractor, Rutgers

CASE STUDY (A): The American Buyers’ Perspective

The two case studies presented examine foreign exchange risk from two perspectives:

(Part A) An American couple has put a down payment on a lovely new condo in Puerto Vallarta, agreeing to pay 5,000,000 Mexican pesos on delivery of the condo in 12 months. … CONTINUED ON ARCHIVE

(Part B) But the next day, they have second thoughts and offer the Mexican real estate developer $307,000 instead. The Mexican firm needs to consider the foreign exchange risk from its perspective—while ensuring the sale.

(Part C) Epilogue

Printable Version: Hedging Transactions_Part A_FJContractor_2015