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Case
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Reference no. 105-020-1
Subject category: Finance, Accounting and Control
Authors: K Chandrasekhar (Nanyang Business School (NTU)); Dattatreya G Allampalli (Nanyang Business School (NTU))
Published by: Asian Business Case Centre
Originally published in: 2005
Version: 29 April 2004
Length: 15 pages
Data source: Field research
Topics: Investment risk management; Financial and currency markets; Financial derivatives
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Abstract

The case presents the predicament of an investor and day trader who speculates in the global currency markets. It also illustrates the popular stock market maxim - timing is the essence of investing. However, no investor has an unfailing skill in prediction. Bobby, anticipating a cut in the interest rate, entered the currency spot market in Australia and punted with a short position of A$200,000, a day before the Reserve Bank of Australia (RBA) was scheduled to meet to discuss the economic and monetary policy in July 2003. While Bobby thought he had timed the entry into the Australian dollar spot market, the anticipated interest rate cut by the RBA on the following day did not occur. As a result, the Australian dollar appreciated against the US dollar. Wrong-footed, Bobby faced a ''paper loss'' of A$1,971. What are his options?
Location:
Australia
Industry:
Financial services
Size:
Small to medium sized enterprise
Other setting(s):
2003
Teaching note
-
Reference no. 105-020-8
Subject category: Finance, Accounting and Control
Authors: K Chandrasekhar (Nanyang Business School (NTU)); Dattatreya G Allampalli (Nanyang Business School (NTU))
Published by: Asian Business Case Centre
Originally published in: 2005
Version: 29 April 2004
Length: 6 pages
Data source: Field research
View full details

About

Abstract

The case presents the predicament of an investor and day trader who speculates in the global currency markets. It also illustrates the popular stock market maxim - timing is the essence of investing. However, no investor has an unfailing skill in prediction. Bobby, anticipating a cut in the interest rate, entered the currency spot market in Australia and punted with a short position of A$200,000, a day before the Reserve Bank of Australia (RBA) was scheduled to meet to discuss the economic and monetary policy in July 2003. While Bobby thought he had timed the entry into the Australian dollar spot market, the anticipated interest rate cut by the RBA on the following day did not occur. As a result, the Australian dollar appreciated against the US dollar. Wrong-footed, Bobby faced a ''paper loss'' of A$1,971. What are his options?

Settings

Location:
Australia
Industry:
Financial services
Size:
Small to medium sized enterprise
Other setting(s):
2003

Related

Teaching note
-
Reference no. 105-020-8
Subject category: Finance, Accounting and Control
Authors: K Chandrasekhar (Nanyang Business School (NTU)); Dattatreya G Allampalli (Nanyang Business School (NTU))
Published by: Asian Business Case Centre
Originally published in: 2005
Version: 29 April 2004
Length: 6 pages
Data source: Field research
View full details