Aspen Technology Inc Currency Hedging Review Case Solution

Case Solution

The primary financial officer from the rapidly growing U.S.-based software firm that sells its process-control software to industrial clients all over the world must review the goals, techniques, and recommendations in the firm's currency hedging program. This review is motivated by modifications within the firm's business, particularly its acquisition of a United kingdom subsidiary, other growing overseas expenses, which is recent dpo.

Excel Calculations

AspenTech’s Estimated Cash Flows (‘000) by Currency, 1995

Risk Exposure by currencies

Govt. Interest Rate

Exchange Rate - US/Pound

Exchange Rate = US/Mark

Exchange Rate US/Franc

Exchange Rate US/Yen

Exchange Rate US/Dollar

Implied Volatility

Installments Receivables - Principal amount

Per year Equal InstallmentTotal Receivables

Total Receivables in US $ at spot rate

Questions Covered

1. What are Aspen Technology’s main exchange rate exposures? How does Aspen Tech’s business strategy give rise to these exposures as well as to the firm’s financing need? Please make sure you catalogue the relevant exposures. 

2. Calculate Aspen’s exposures by currency for the past year. What currencies is it long and short?

3. What goal would you recommend for the firm’s currency risk management program? Why? Based on your goal, what type of exposure should Aspen be measuring? Please make sure you provide your rationale in detail for your recommendation.

4. Should the firm maintain its policy of completely eliminating all exposure on booked sales? If not, what policy would you advocate and why? Please make sure you explain what evidence you employed to come to your conclusion.

5. How, if at all, should Aspen’s recent transition from a private to a publicly-traded firm affect its approach to risk management? Make sure your “forecast”: is linked to evidence from the case, evidence you derived from the analysis of the case, or other information.