Three contracted amounts in yen, francs and dollars, each sized in the currency of the entity at risk: that is the GF581 Unit 3 transaction exposure analysis, completed. Searches like "gf 581 unit 3 assignment example", "gf581 unit 3 sample" and "gf581 unit 3 example" land here.
What a finished GF581 Unit 3 transaction exposure analysis looks like
About four pages built on an exposure register and a sensitivity table. The register gives each item an entity, currency, amount, settlement date and functional currency. The parent, reporting in dollars, is long 420 million yen, worth 2,837,838 dollars at 148.00, and short 1.9 million francs, 2,159,091 at 0.8800. The Thai subsidiary, whose functional currency is the baht, owes 3.2 million dollars for resin in 60 days and expects 2.1 million from regional distributors in 45, a net short position of 1.1 million dollars, or THB 37.4 million. The sensitivity table applies a 10 percent adverse move to each item: 257,985 dollars on the yen, 215,909 on the franc and THB 3.74 million at the plant. A volatility-based figure follows, the 95 percent one-sided loss over each item's own horizon.
How a GF581 Unit 3 example is structured
Entity comes before currency in the analysis, because an exposure exists only relative to the currency in which an entity keeps its books. That choice puts the resin bill where it belongs: to the parent, a dollar invoice is no exposure at all, while to a baht-functional plant it is a short dollar position. The 2.1 million collected on day 45 offsets the resin bill only if it is held in dollars until day 60, a holding decision the analysis states rather than assumes, leaving 1.1 million open. The parent's yen and franc items share neither currency nor date, yet they are measured together over a common 90 days, at assumed volatilities of 10 and 8 percent and a correlation of 0.55. Stand-alone 95 percent losses sum to 375,447 dollars; measured as one position, the figure falls to 195,400.
A register keyed to the entity
Entity, currency, amount, date and functional currency form five columns. Listing the Rayong plant separately keeps a dollar resin invoice from vanishing into the parent's dollar ledger, where it would look like no exposure at all.
Yen owed to the parent
420 million yen from a Japanese desalination contractor, invoiced in yen at the customer's request and due in 90 days. At 148.00 it is worth 2,837,838 dollars today and 2,579,853 after a 10 percent fall in the yen.
Francs the parent must find
1.9 million francs to a Swiss builder of membrane casting lines, payable in 180 days. A franc 10 percent stronger raises the dollar cost from 2,159,091 to 2,375,000.
The plant's dollar mismatch
Resin billed at 3.2 million dollars against 2.1 million of dollar sales leaves the plant short 1.1 million, THB 37.4 million at spot. Its 95 percent one-sided loss over 60 days, at 6 percent volatility, is THB 1.51 million.
Measured together, not summed
Summed, the two 90-day figures for yen and franc reach 375,447 dollars. As one position with a 0.55 correlation they reach 195,400, and the analysis notes that the offset lasts only while both invoices stay open.
Where marks go in GF581 Unit 3
Transaction exposure work in GF581 typically loses marks by measuring everything from the parent's chair. A dollar invoice at a baht-functional plant then disappears, and graders in many sections treat that omission as the central error of the unit. Netting claimed across different settlement dates, with no word on how the earlier cash would be held, is the next common deduction. A sensitivity table with one uniform shock and no horizon reads as incomplete, since a 90-day and a 180-day position do not carry the same risk. Economic exposure slipped into the register, such as a rival's pricing, belongs to a later unit and costs clarity here. Summing stand-alone risk figures across currencies overstates the total, and papers that account for correlation usually collect the analysis credit that summing misses.
Get a GF581 Unit 3 example written to your instructions
Every receivable and payable your Unit 3 case lists, with amounts, currencies and dates, plus the rubric: that is what goes into the custom analysis. It measures each item from the books of the entity holding it, is returned in 24-48h and costs nothing the first time. Volatilities your instructor supplied replace the composite ones.
GF581 Unit 3 questions, answered
Which entity's currency should exposure be measured in?
The functional currency of the entity that owns the receivable or payable. A dollar invoice creates no transaction exposure for a dollar-functional parent but does for a subsidiary keeping its books in baht, euros or pesos. Stating the functional currency in the register, one column per item, makes the choice visible and keeps the analysis from overlooking subsidiary positions.
Can receivables and payables in the same currency be netted?
Partly, when they settle close together and the earlier cash can be held in that currency until the later one falls due. Netting across dates assumes a holding decision, so the analysis should state it. Netting across different currencies is a separate question that depends on how the two have moved together; it is measured, not assumed.
Is a 10 percent shock enough for the sensitivity table?
It is a common convention and easy to read, but it treats a volatile pair and a stable one alike. Many sections accept it alongside a volatility-based figure, which scales the loss to each currency's history and to the time left before settlement. Showing both, and saying which one the hedging decision should rest on, usually satisfies the rubric.