Assignment for Tiffany & Co. - 1993 (PLEASE STATE YOUR ASSUMPTIONS!!!

1. What is the currency risk exposure facing Tiffany? What dimension is more relevant in the case of Tiffany: transaction exposure, translation exposure, economic exposure? Try to quantify them. 2. In the situation facing Tiffany, should currency risk be hedged? Why? 3. How much would you hedge? Hint: a) distinguish the exposure into the ones you would like to financially hedge" and the others. b) how would you hedge (i.e: financially or non-financially?). c) if financially, what is the duration of the hedge you would like to do Do NOT go into the details of choosing the instrument (i.e., futures or option contract).