IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Asia-Pacific Hotels International: Managing Short Term Cash in the Derivatives Market

Listed author(s):
  • Pat Obi


    (Department of Finance and Economics, Purdue University Calumet, 2200 169th Street, Hammond IN 46323, USA)

  • Jeong Gil Choi

    (Kyung Hee University, Korea)

Registered author(s):

    This case deals with a cash management problem for an international hotel based in Seoul, Korea. Although successful in its core hotel operations, the firm has not been as successful in managing its short term cash flow. Part of the firm's operating and materials costs are in US dollars although all of its operating incomes are in the local currency, the South Korean won. This imbalance creates a currency risk exposure in the management of the firm's working capital. To ensure that it has sufficient funds to pay its dollar-denominated costs, the firm is considering the investment in a sizeable amount of dollar-denominated time deposits. Pursuing this strategy, however, involves a two-fold global dimension: First, the firm must determine what exchange rate conditions would make it suitable to invest in dollar-denominated time deposits rather than in the local currency. Second, for any such dollar-denominated short-term investments, the firm must decide when and how to use the facilities of the Eurodollar futures market to hedge the currency risk exposure. The specific approach being considered includes a combined position in Eurodollar time deposits and Eurodollar futures contract. This case presents an opportunity to learn how firms can successfully combine short-term investments in a foreign currency-denominated time deposit with positions in the derivatives markets, the aim of which is to manage exposure to currency risk.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Asian Case Research Journal.

    Volume (Year): 14 (2010)
    Issue (Month): 02 ()
    Pages: 233-244

    in new window

    Handle: RePEc:wsi:acrjxx:v:14:y:2010:i:02:p:233-244
    Contact details of provider: Web page:

    Order Information: Email:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wsi:acrjxx:v:14:y:2010:i:02:p:233-244. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.