DBA 8010 Module 3 Foreign Exchange Markets Example

Course	DBA-8010 The Global Business Context Trends, Issues, and Markets
Module	Module 3
Paper type	Module 3 written assignment: foreign exchange markets
Length	About 517 words, 4 pages
Format	APA 7 student paper
School	Thomas Edison State University
Program	Doctor of Business Administration
Updated	October 2026

Free sample paper for DBA 8010 Module 3

Euros In, Euros Out: Building a Currency Policy Before Signing a European Contract

Student Name

Doctor of Business Administration, Thomas Edison State University

DBA-8010: The Global Business Context: Trends, Issues, and Markets

Mentor Name

Month Day, Year

What this page is doingThe title captures the policy's main idea, offsetting euro revenue with euro costs before using financial hedges for the rest.

Euros In, Euros Out: Building a Currency Policy Before Signing a European Contract

The Contract

Our beverage customer will pay in euros for colors supplied to its European plants: about 4.2 million euros a year for three years. Our costs for that business will be partly in euros, the toll processor's fees and European raw materials, about 2.6 million euros a year, and partly in dollars, our technical staff and formula ingredients shipped from New Jersey.

How Exchange Rates Are Set and Quoted

De Kluyver (2012) explains that exchange rates are prices set in a global market where banks, firms and investors trade currencies, influenced by interest rate differences, inflation, trade flows and expectations. Rates are quoted as the price of one currency in another; a quote of 1.08 dollars per euro means a euro buys 1.08 dollars. Spot rates apply to immediate exchange; forward rates, set today for future exchange, differ from spot mainly by the interest rate gap between the two currencies.

Our Exposure

Bartram et al. (2010) studied why measured exchange rate exposure is often smaller than expected and found that firms reduce it through pass-through of currency changes to prices, operational hedging such as matching foreign costs and revenues, and financial hedging. Each lever is available to us.

Exposure	Source	Size
Transaction	Euro receivables from the customer, net of euro payments to the toll processor	About 1.6 million euros a year
Economic	Competing against European color makers whose costs are in euros; a weak euro makes their prices lower in dollars	Hard to measure; affects future margins
Translation	None yet, since we have no European subsidiary	Would arise if we later acquire one

Operational Hedge

The toll processing contract is itself a hedge. Paying 2.6 million euros a year to the Dutch processor offsets most of our euro revenue, cutting net exposure from 4.2 to about 1.6 million euros. If we later buy European raw materials directly, the offset grows.

What this page is doingShowing that the entry decision of Module 2 also reduces currency risk links strategy and finance, which is the point of treating exposure at the firm level.

Financial Hedge Policy

Layering hedges, more for near months and less for later months, smooths results while leaving room for forecast changes, since our euro volume depends on the customer's orders. Evidence from Allayannis and Ofek (2001) shows derivative users carrying less exchange rate exposure, which supports hedging of this kind as risk management rather than a bet.

Element	Policy
What to hedge	Net euro exposure after operational offsets
How much	75 percent of the next six months' expected net exposure; 50 percent of months seven to twelve
Instrument	Forward contracts with our bank; options only with board approval
Review	Quarterly by the finance committee
Prohibited	Speculative positions unrelated to business flows

Pricing

The contract allows a price review if the euro moves more than 8 percent in either direction, sharing large currency swings with the customer, a form of pass-through.

Conclusion

Before signing a euro contract, the firm should understand how rates are set, measure its net exposure, use its euro costs as a natural hedge and adopt a written policy for hedging what remains. Together, operations, financial contracts and pricing terms can keep a currency swing from erasing the contract's margin.

References

Allayannis, G., & Ofek, E. (2001). Exchange rate exposure, hedging, and the use of foreign currency derivatives. Journal of International Money and Finance, 20(2), 273-296. https://doi.org/10.1016/S0261-5606(00)00050-4

Bartram, S. M., Brown, G. W., & Minton, B. A. (2010). Resolving the exposure puzzle: The many facets of exchange rate exposure. Journal of Financial Economics, 95(2), 148-173. https://doi.org/10.1016/j.jfineco.2009.09.002

De Kluyver, C. A. (2012). Fundamentals of global strategy. Saylor Academy.

DBA 8010 Module 3 instructions, in plain terms

This written assignment covers foreign exchange markets. Expect to explain how exchange rates are determined and quoted, identify the kinds of exposure a firm faces, and recommend how to manage them through operations, financial hedges and contract terms. Quantify exposure where you can, distinguish gross from net exposure, and write a policy rather than a single hedging decision, since policies guide many decisions over time. Distinguish gross exposure from net exposure after natural offsets, and write the policy with amounts, instruments, limits and a review schedule. Explain how forward rates relate to interest rates. Keep the policy short enough to use. State your policy's limits in writing.

Inside the DBA 8010 Module 3 example

The paper describes a euro contract and the firm's euro costs. A section explains how rates are set and quoted. A table identifies transaction, economic and translation exposure, and research on exposure explains how firms reduce it. Sections show the toll contract as an operational hedge, set a layered hedging policy in a table and add a pricing clause. The conclusion combines the three levers. A pricing clause that shares large currency swings with the customer adds a third lever beside operational and financial hedges, and research on derivatives use supports hedging as risk reduction. A table separates transaction, economic and translation exposure and sizes each where possible. A layered schedule hedges more of the near months than the later ones. An operational hedge cuts net exposure from 4.2 to about 1.6 million euros.

DBA 8010 Module 3 rubric: what earns full marks

The marks follow four things: currency concepts explained correctly, exposure found and sized accurately, a workable hedging policy and writing fit for a doctorate. Papers that net operational offsets before financial hedging show sophistication. A written policy with limits and review shows governance. Linking currency management to earlier strategic choices demonstrates integration. Combining three levers, operations, contracts and financial hedges, shows a complete approach to currency risk. A prohibition on speculation shows sound governance. Explaining how exchange rates are quoted and set, before measuring exposure, shows command of the basics a policy rests on. A policy table with amounts, instruments and review dates shows readiness for real use.

Common DBA 8010 Module 3 mistakes, and how to avoid them

Students lose points by hedging gross rather than net exposure, by confusing transaction and translation exposure or by recommending a single trade instead of a policy. Others ignore operational hedges. Net out natural offsets. Distinguish the types of exposure. Write a policy with amounts, instruments and review. Consider pricing terms. Use contract terms, such as price review clauses, alongside financial hedges. Measure net exposure first, then hedge only what remains after natural offsets. Review the policy every quarter. A free first sample on your own DBA-8010 foreign exchange assignment is available on request. Show the euro exposure in dollars at two exchange rates so the size of the risk is plain.

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DBA 8010 Module 3 questions, answered

Where can I find a free DBA 8010 Module 3 sample paper?

A currency policy for a natural color maker's euro contract is in the assignment above.

What determines exchange rates?

Supply and demand in currency markets, influenced by interest rates, inflation, trade flows and expectations.

What is an operational hedge?

Reducing currency exposure by matching foreign revenues with costs in the same currency.

Why layer hedges over time?

Hedging more of near-term exposure and less of later exposure smooths results while allowing for forecast changes.

What is the difference between transaction and economic exposure?

Transaction exposure affects specific foreign currency amounts; economic exposure affects long-term competitiveness.

DBA 8010 Module 3 Written Assignment: Exchange Rates, Euro Contracts and a Hedging Policy Example