Zapa Chemical & Buba
This case focuses on the hedging of a currency exposure, a long Deutschemark position, by a U.S.-based multinational chemical company. The case takes place during the August - September period in 1992 when the European Monetary System experienced a crisis as a result of a variety of world political and economic events, including the monetary policies pursued by the Bundesbank of Germany.
Students generally enjoy risk management or currency hedging problems. Within this context, however, they are also forced to learn more of the dynamics of currency markets and the history of recent turmoil within the EMS. A final teaching point which can be emphasized in summary discussions is the willingness or reluctance of management to change previous decisions when confronted with new information.