BU443 Lecture Notes - Lecture 5: Aspen Skiing Company, Chamonix, French Franc
Document Summary
Four operating exposure vignettes: aspen skiing company. This eponymous company owned and managed a resort in aspen, colorado. All of the firm"s revenues and costs were denominated in greenbacks. All the firm"s assets were located in colorado. Yet this company exhibited positive exposure to such foreign currencies as the canadian dollar, the french franc, the italian lira, etc. To such an extent was the firm"s positive exposure to these currencies that when these currencies depreciated precipitously vis- -vis the greenback (i. e. , the greenback appreciated) in the early 1980"s the firm had to declare itself bankrupt. Clearly, the firm did not possess transactions exposure to these foreign currencies, as no contracts were extant denominated in these currencies. The firm possessed operating exposure to these currencies. The steep reduction in the firm"s greenback revenue stream, as a result of the depreciation of the foreign currencies, was brought about by decisions taken by the firm"s clientele.
