Abstract
Northern Textiles (NTL) used highly complex derivatives to hedge its currency risk, and these structured products have been profitable in the past. But in 2008, unanticipated movements in exchange rates have led to serious losses. Seth, the Chairman of NTL, has come to know about the losses on a specific deal, but the Treasurer has ensured that he is the only person who understands the derivative book in its entirety. Though Seth is not aware of how grave the problem is, he realizes that he must review NTL's risk management policies and perhaps even replace the CFO.
Additional Information
Product Type | Case |
---|---|
Reference No. | F&A0559 |
Title | Northern Textiles Limited (A) |
Pages | 21 |
Published on | Oct 27, 2020 |
Year of Event | 2008 |
Authors | Varma, Jayanth R; Ghosh, Rahul; |
Area | Finance and Accounting (F&A) |
Discipline | Finance |
Sector | Manufacturing |
Learning Objective | Evaluate the risks of complex derivatives products. Understand the control issues in a treasury which is run as a profit centre. |
Keywords | Risk Management; Foreign Exchange; Derivatives; Structured Products |
Country | India |
Organization | Nothern Textiles |
Access | For All |
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