| Course | GF584 Treasury Management II |
|---|---|
| Unit | Unit 3 |
| Paper type | Exposure measurement workup |
| Length | About 950 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF584 Unit 3
One Figure Before Any Instrument: A Unit 3 Exposure Measurement Workup for Australian Receipts
[Student Name]
Purdue University Global
GF584: Treasury Management II
Unit 3 Exposure Measurement Workup
[Instructor Name]
[Date]
The dryer maker, its receipts, the rates and the volatility are composite and illustrative; the articles and textbook cited are real.
The Measure, Defined First
Cash flow at risk here means the loss in dollar value of the year's net Australian receipts, measured against today's spot rate, that would be exceeded only one year in twenty. It is a one-sided measure at 95 percent confidence. It covers rate risk only; volume risk on sales not yet ordered is set aside and discussed at the end (Stein et al., 2001).
Inputs and Sources
1. Spot rate: 0.6620 dollars per Australian dollar, the treasury's closing rate on the measurement date.
2. Volatility: 10.5 percent a year, from three years of daily rates, annualized.
3. Confidence: 95 percent one-sided, a multiplier of 1.645.
4. Horizon: each quarter's receipts are measured to the end of that quarter.
A Ladder Net of Sydney Costs
Expected dealer receipts, in millions of Australian dollars, are 21.0, 18.5, 9.0 and 15.5 by quarter, 64.0 in total. The Sydney sales office spends about 1.3 million a quarter in Australian dollars, which offsets receipts naturally. Net receipts are 19.7, 17.2, 7.7 and 14.2 million, 58.8 million in all. At spot, those are $13.04, $11.39, $5.10 and $9.40 million, $38.93 million in total.
Of the gross 64.0 million, 22.0 million is committed through dealer orders already booked and 42.0 million is forecast. The split matters because a reader should see how much of the final figure rests on orders not yet placed: about two thirds.
Quarters on One Rate Path
The four quarters are not separate bets. They sit on one rate path, so a fall in the Australian dollar during the first quarter is still there when the second, third and fourth quarters are converted. Each later quarter inherits every move that hit an earlier one, plus its own.
The calculation follows that logic. Each pair of quarters contributes the product of their dollar amounts, the variance rate and the shorter of their two horizons. Summed across all sixteen pairs and multiplied by the variance rate, the result is the variance of the year's dollar proceeds. Its square root times 1.645 gives the 95 percent figure: about $4.30 million, or 11.1 percent of the $38.93 million expected.
Because every quarter is converted on the same rate path, the right figure is neither the sum of four separate risks nor the result of treating them as unrelated: it is one number computed from how much of the path each pair of quarters shares.
Three Shortcuts, Three Errors
Summing quarters: $4.90 million. Computing each quarter's 95 percent loss alone, about $1.13, $1.39, $0.76 and $1.62 million, and adding them assumes the four losses are perfectly correlated at full size. They share only part of the path, so the sum overstates by about 14 percent.
Treating quarters as independent: $2.53 million. Squaring each quarter's figure, adding and taking the root assumes no shared path at all, as if each quarter faced its own fresh rate. That ignores that a first-quarter fall carries forward, and understates the risk by about 41 percent.
A flat 10 percent shock: $3.89 million. Applying the same move to every quarter is simple and easy to explain, but it gives the first quarter a three-month move as large as the fourth quarter's twelve-month move. It overstates near quarters, understates far ones, and is tied to no confidence level.
Surveys of US nonfinancial firms show that many measure currency risk with simple scenarios of this kind, which is why a workup should show how far the shortcut sits from a consistent figure (Bodnar et al., 1998).
A Sensitivity Strip
The result scales with volatility. At 8 percent, the figure is about $3.28 million; at 10.5 percent, $4.30 million; at 13 percent, about $5.33 million. A move from three years of history to one year, which would pick up a more volatile period, could raise the figure by a quarter. The strip shows readers how much of the answer rests on a single estimated input.
Why One Figure Matters
The figure gives the treasurer a baseline against which every later decision can be measured. A forward on committed orders, an option on the forecast, or a decision to leave a quarter open can each be expressed as a reduction in this figure and a cost. Without it, hedges are judged by whether they made or lost money after the fact, which says nothing about whether they reduced risk. Research on why firms manage risk argues that hedging earns its keep by keeping internal funds available for capital spending, so the measure should be stated in the same cash terms the budget uses (Froot et al., 1993).
What the Number Leaves Out
The $4.30 million covers rate risk on the expected amounts only. Two thirds of the gross receipts are forecast, and in a wet harvest or a dry one, Australian dealer orders could differ from the forecast by far more than any rate move would change their dollar value. Volume risk is not in this figure. A hedge sized to the full 58.8 million would therefore protect against one risk while possibly creating another, which is why the next step addresses committed orders first.
Checks
The ladder totals were recomputed from the dealer forecast. Each quarter's stand-alone figure was checked against 1.645 times volatility times the square root of its horizon times its dollar amount. The joint figure lies between the independent and summed figures, as it must.
References
Bodnar, G. M., Hayt, G. S., & Marston, R. C. (1998). 1998 Wharton survey of financial risk management by US non-financial firms. Financial Management, 27(4), 70-91. https://doi.org/10.2307/3666414
Froot, K. A., Scharfstein, D. S., & Stein, J. C. (1993). Risk management: Coordinating corporate investment and financing policies. The Journal of Finance, 48(5), 1629-1658. https://doi.org/10.1111/j.1540-6261.1993.tb05123.x
Stein, J. C., Usher, S. E., LaGattuta, D., & Youngen, J. (2001). A comparables approach to measuring cashflow-at-risk for non-financial firms. Journal of Applied Corporate Finance, 13(4), 100-109. https://doi.org/10.1111/j.1745-6622.2001.tb00430.x
Reading the GF 584 Unit 3 instructions
The third GF584 unit asks you to measure a currency exposure as one figure. Define the measure first: the loss, horizon, confidence level and benchmark rate. List inputs with sources, including spot, volatility and the confidence multiplier. Build an exposure ladder by period, net of any natural offsets such as local costs, and separate committed from forecast amounts. Compute the joint figure in a way that reflects how periods share one rate path, and show the method. Then compute common shortcuts, such as summing periods, treating them as independent and applying a flat shock, and explain the direction of each error. Add a sensitivity to volatility. State what the figure excludes, especially volume risk. Cite research on cash flow at risk in APA 7.
Inside the GF584 Unit 3 example
A definition of the measure opens the sample, citing Stein and colleagues on cash flow at risk. Inputs follow with sources. The ladder lists gross receipts of 64.0 million Australian dollars, nets 1.3 million a quarter of Sydney costs and shows that two thirds rest on forecast orders. A section explains that each later quarter inherits earlier moves, and computes the joint figure of about $4.30 million; the highlighted sentence states the method in words. Three shortcuts follow, each with its error explained, citing Bodnar and colleagues on firms' use of simple scenarios. A sensitivity strip runs from about $3.28 million at 8 percent volatility to $5.33 million at 13 percent. Sections on why one figure matters, citing Froot and colleagues, and on volume risk precede checks.
Where the points sit in the GF584 Unit 3 rubric
Graders of GF584 measurement workups first check that the measure is defined before it is computed and that inputs are sourced. The analytical share rewards a joint calculation that reflects shared rate paths across periods, with the method explained in words as well as numbers. Computing common shortcuts and explaining why each overstates or understates the risk earns substantial credit. Separating committed from forecast amounts and stating what the figure excludes show judgment about how the number will be used. Instructors in the MS in Finance program value a sensitivity to the least certain input. Clear checks, with Stein and colleagues and the risk management studies listed in APA 7, complete the scoring.
GF584 Unit 3 help from the desk
The most common GF584 Unit 3 error is adding each quarter's risk, which treats partly shared moves as fully shared and overstates the figure. Others treat quarters as independent, which ignores that a fall early in the year carries forward. Natural offsets such as local costs are left out, inflating the exposure. Volatility appears without a source or window. Volume risk on forecast sales is mixed into a rate measure without comment. For any receipts or payments your case supplies, keep the steps: define the measure, list inputs, build a net ladder, compute the joint figure, compare shortcuts, test volatility and state exclusions.
Get a GF584 Unit 3 example written to your instructions
The exposure described in the Unit 3 case, by period and amount, any volatility or rate data supplied, and the prompt with its rubric are what the workup needs. A custom version defines its measure, computes one figure with the arithmetic shown and names what it excludes; it is back in 24-48h, and the first request is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF584 Unit 3 questions, answered
Is cash-flow-at-risk the same as value at risk?
They are close relatives. Value at risk usually measures possible loss in the market value of a position over a short horizon, often days. Cash-flow-at-risk applies the same idea to operating cash flows over a longer period, such as a year of receipts. For a corporate treasury exercise the second usually fits better, but define whichever measure your course uses.
Where should the volatility figure come from?
Historical exchange rate data is the usual source: compute the standard deviation of daily or weekly changes over a stated window and annualize it. Implied volatility from option prices is an alternative that reflects current market expectations. Either is defensible if cited. State the window and the date, since volatility changes over time and a grader may check it.
Why not just apply a 10 percent shock?
A flat shock is easy to read, and many sections accept it alongside a statistical measure. Its weakness is that it treats a three-month receipt and a twelve-month receipt as equally exposed, when the later one has more time to move. A measure scaled to horizon and volatility corrects that, and showing both lets a reader compare them directly.
Where can I find a free GF584 Unit 3 sample paper?
This page carries a full GF584 Unit 3 exposure measurement workup for a year of Australian receipts, with a net ladder, a joint cash flow at risk figure, three shortcuts compared and APA 7 references.
Why is the joint figure lower than adding the quarters?
Adding assumes each quarter's full loss happens together. The quarters share only part of one rate path, so the combined risk, about $4.30 million, is less than the $4.90 million sum.