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Discuss and compare the use of derivatives

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Reference no: EM131706223

The assessment for this module involves two components: a written assignment and the end of unit tests. The written assignment is worth 90% of the overall grade and the end of unit tests is another 10%. The overall grade for this module is calculated from the sum of weighted component grades.

Part A - Suppose you are a Chief Financial Officer (CFO) of a UK based listed company. The company is currently trading at £10 per share and 100 million shares in issue. The total market value of the issued share capital of the company is £1,000 million. You have been requested to write a report to the board of directors with respect to raising an additional funding of £500 million to enable the next stage of development of international projects to be carried out.

For the report in Part A, it should critically review the advantages and disadvantages of the main funding options with many appropriate academic references. Further, your report should form the basis for a discussion at the next board meeting. Especially, it would be expected that this report would include the different options available through the equity and debt markets.

Part B - This additional funding will allow the business to become more global with the opportunity to develop a market in numerous countries with payment being made in the local currency. The directors are conservative in their attitude to risk. You have been requested to provide a report to the directors critically evaluating alternative derivatives including forwards, futures, options and swaps that are available in the market in order to minimise the risk with respect to payment in international currencies.

Note 3:
For the report in Part B, it should critically discuss and compare the use of derivatives including forwards, futures, options and swaps to hedge Foreign Exchange (FX) Risk. By using many appropriate academic references, discussions may include:
- how it works in mitigating FX risk.
- advantages and disadvantages of each type of derivative in managing FX risk.

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The paper is in relation to assessing the various fund raising options i.e. to chose among the debt or the equity for meeting the additional fund requirement of the company. Therefore, it is the duty of the key members for assessing the various options before deciding upon the source of funds. Moreover, for hedging oneself from the fluctuations in foreign currencies risk there is a need to evaluate among the various derivative instrument and choose the one which is best suitable as per the requirement of the company.

Reference no: EM131706223

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Reviews

inf1706223

3/14/2018 5:34:38 AM

Best paper I have ever received! Just 1 small revision and completed the paper. Would love to work with you again on future reports!! The Advantages and Disadvantages for Options are the same as Futures and the Advantages and Disadvantages of Swaps Contracts are the same as forwards.

len1706223

11/4/2017 2:46:29 AM

? The essay must be around 4,000 words (a minimum word count of 3,800 and a maximum word count of 4,200) excluding the references, tables, figures and notes. You must provide word count. Parts A and B are expected to be equally weighted, i.e., around 2,000 words for each part. ? You should also refer to further references from a variety of sources (e.g., journals, books, working paper etc.) in relation to this topic. ? All references must be correctly cited following the APA 6th referencing system

len1706223

11/4/2017 2:46:07 AM

? The assignment is worth 90% of your overall mark. It is expected that the assignment will apply the concepts and approaches developed in the text and credit will be given for evidence of wider reading. ? You are expected to link the reports for Parts A and B together in the form of a single essay. ? The essay must be around 4,000 words (a minimum word count of 3,800 and a maximum word count of 4,200) excluding the references, tables, figures and notes. You must provide word count. Parts A and B are expected to be equally weighted, i.e., around 2,000 words for each part.

len1706223

11/4/2017 2:45:54 AM

P4-P3 All the required elements have been addressed; some reference used; argument are supported by some relevant evidence; there is relevant information but not fully discussed; P2-P1 At most one element has not been addressed; little reference used; some relevant information used; argument is not well supported by relevant evidence; F1 Little reference used; no information used; argument are not supported by relevant evidence; =F2 No reference used; no information used; argument is not supported by relevant evidence;

len1706223

11/4/2017 2:45:47 AM

The assignment is a 2 part project. 2000 words for each part. I am uploading the instructions for this assignment. Please read carefully.Thank youMarking Criteria* =D2 All the required elements have been well addressed; appropriate and clear use of references; well supported argument with evidence; appropriate use of all the relevant information; Good presentation of arguments; Substantial evidence of extensive readings; D1-P5 All the required elements have been fully addressed; clear use of references; argument are supported by evidence; appropriate use of all the relevant information; Good presentation of arguments;

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