| Course | GF584 Treasury Management II |
|---|---|
| Unit | Unit 8 |
| Paper type | Treasury policy extract |
| Length | About 960 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 8
Rules a Successor Could Apply: A Unit 8 Treasury Policy Extract Tested on Three Proposals
[Student Name]
Purdue University Global
GF584: Treasury Management II
Unit 8 Treasury Policy Extract
[Instructor Name]
[Date]
The dryer maker, its limits and the three proposals are composite and illustrative; the articles cited are real.
1. Purpose and Scope
1.1 This policy governs the management of currency and interest rate exposure and the use of derivatives by the company and its subsidiaries. 1.2 Its purpose is to reduce the variability of cash flows and earnings that arises from the business. It does not permit trading for profit.
2. Definitions
2.1 Committed exposure: a cash flow fixed in amount and date by a signed order, invoice or contract. 2.2 Forecast exposure: a cash flow expected from the sales or purchasing plan but not yet committed. 2.3 Measured exposure: the 95 percent one-year cash flow at risk computed by the joint method adopted in the Unit 3 workup, recalculated each quarter.
3. Authority
3.1 The treasurer may approve single transactions up to $10 million of notional and twelve months of tenor. 3.2 The chief financial officer may approve up to $30 million and eighteen months. 3.3 Anything larger or longer requires finance committee approval. 3.4 Authority applies to the notional of the whole transaction, including any amount that could become payable under its terms.
4. Permitted and Prohibited Instruments
4.1 Permitted: forwards, bought options, plain interest rate swaps, and collars or participating forwards on committed exposure only. 4.2 Sold options are permitted only as part of a structure in 4.1 that covers committed exposure. 4.3 Prohibited: any instrument whose notional can increase as the market moves, any instrument that ends automatically when the market moves in the company's favor, and any instrument the treasury cannot value independently.
5. Cover Corridors
5.1 Committed exposure: 75 to 100 percent. 5.2 Forecast exposure within six months: 40 to 70 percent. 5.3 Forecast exposure seven to twelve months out: 20 to 50 percent. 5.4 No cover beyond eighteen months without committee approval. 5.5 Floating-rate debt: fixed share between 40 and 80 percent. 5.6 Bought options count toward a corridor at their delta, recalculated monthly.
Every clause in the policy contains a number, so the person applying it never has to guess what the author meant; a rule without a number would leave the decision to whoever is on duty when the bank calls.
6. Counterparties
6.1 Each counterparty must hold a long-term rating of A-minus or better. 6.2 No single bank may hold more than 40 percent of outstanding derivative notional. 6.3 Every counterparty must have a signed master agreement before trading.
7. Segregation of Duties
7.1 Dealing, confirming and settling are performed by three different people. 7.2 Confirmations are matched against deal tickets on the trade date. 7.3 No dealer may approve a payment arising from a trade the dealer executed.
8. Reporting
8.1 Monthly to the chief financial officer: each open position, its market value, the cover ratio against each corridor and counterparty concentrations. 8.2 Quarterly to the finance committee: measured exposure before and after hedging, the cost of hedging and any exception.
9. Exceptions
9.1 Any transaction outside this policy requires prior written approval by the finance committee, recorded in its minutes.
10. Borrowing
10.1 No borrowing may be drawn by the company or a subsidiary if it would breach a covenant in any loan or note agreement. 10.2 Treasury reports covenant headroom on every new borrowing to the chief financial officer before it is drawn.
Why Policies Are Written This Way
Surveys of US nonfinancial firms found that most derivatives users have a documented policy and that boards most often want reports on positions and exposures, which this extract builds into clauses 8.1 and 8.2 (Bodnar et al., 1998). Firms that use currency derivatives tend to be those with larger foreign exposure and greater need to protect investment spending, so a policy should tie cover to measured exposure, as clause 5 does (Géczy et al., 1997).
Test Log
Proposal A: a bank's Australian dollar structure. The bank offers to buy 2 million Australian dollars a month from the company at 0.6750 for twelve months, well above the forward, with the amount doubling to 4 million in any month the rate settles above 0.6750. Clause 4.3 stops it: the notional can increase as the market moves. Clause 3.4 also applies, because the possible notional, 48 million Australian dollars, sets the approval level. Result: rejected.
Proposal B: an oversized forward. A sales manager asks treasury to sell 12.0 million Australian dollars forward for the fourth quarter, against a forecast of 15.5 million gross. The fourth quarter is ten months out, so clause 5.3 applies: cover of 20 to 50 percent, or at most 7.75 million. The request alone is 77 percent. Under clause 5.6 the existing put counts at its delta, about 38 percent, so the forward would take cover to about 115 percent. At most about 1.9 million Australian dollars could be added. Result: rejected as proposed; may be resubmitted at that size, or in full once orders are committed under clause 5.1.
Proposal C: the $54 million swap. A pay-fixed swap is permitted under clause 4.1. A 60 percent fixed share sits inside the 40 to 80 percent corridor in clause 5.5. The notional exceeds $30 million, so clause 3.3 requires committee approval. Result: conditioned on finance committee approval.
How the Extract Will Be Reviewed
The treasurer will review the policy each year and after any exception, and the committee approves changes. A policy that has not been tested against real proposals tends to be revised only after a loss; running each year's three largest proposals through the clauses, as above, keeps it current (Brown, 2001).
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
Brown, G. W. (2001). Managing foreign exchange risk with derivatives. Journal of Financial Economics, 60(2-3), 401-448. https://doi.org/10.1016/S0304-405X(01)00049-6
Géczy, C., Minton, B. A., & Schrand, C. (1997). Why firms use currency derivatives. The Journal of Finance, 52(4), 1323-1354. https://doi.org/10.1111/j.1540-6261.1997.tb01112.x
GF584 Unit 8 instructions, in plain terms
Unit 8 of GF584 asks for an extract of a treasury policy and a test of it. Order clauses as a reader applying them would need: purpose and scope, definitions, authority, permitted and prohibited instruments, cover corridors, counterparties, segregation of duties, reporting, exceptions and borrowing. Define committed, forecast and measured exposure early, tying the measured figure to the method used earlier. Write every clause as a rule with a number in it. Name prohibited features, such as notionals that can grow. Say how bought options count toward corridors. Then run several realistic proposals through the clauses in order, citing the clause that stops or conditions each. Explain how the policy will be reviewed. Cite research on corporate hedging practice in APA 7.
How the GF 584 Unit 8 example is put together
Purpose and scope open the extract, followed by definitions tied to the joint measurement method. Authority is set by size and tenor, with notional measured on the full possible amount. Permitted and prohibited instruments are listed, banning anything whose notional can increase. Corridors are keyed to certainty, with bought options counted at their delta, and the highlighted sentence states the drafting principle that every clause carries a number. Counterparty, segregation, reporting, exception and borrowing clauses follow. A section cites Bodnar and colleagues and Géczy and colleagues. The test log rejects the doubling structure under clause 4.3, cuts the forward to about 1.9 million Australian dollars and conditions the swap on committee approval. An annual test closes the extract, citing Brown.
Where the points sit in the GF584 Unit 8 rubric
GF584 policy extracts earn their first points for complete coverage of authority, instruments, limits, counterparties, segregation and reporting. Graders check that each clause is a rule with a number, not an aspiration, and that definitions come before the clauses that depend on them. The analytical share rewards prohibitions written by feature, such as growing notionals, rather than by product name. A test log that runs real proposals through the clauses and cites the clause that decides each one shows the policy works. Instructors in the MS in Finance program value consistency with earlier measurement and hedging work. Survey research on hedging practice listed in APA 7 completes the grade.
GF584 Unit 8 help from the desk
Many GF584 Unit 8 extracts state goals, such as managing risk prudently, without rules that could decide a case. Others set authority limits without saying whether they apply to the initial or the maximum notional. Prohibited instruments are named by product, so a renamed structure slips through. Corridors ignore how options count. Segregation is mentioned without naming separate roles. The test log is missing or only describes proposals without citing clauses. Whichever company the course uses, arrange the extract as purpose, definitions, authority, instruments, corridors, counterparties, segregation, reporting, exceptions, borrowing and a test log with clause numbers.
Get a GF584 Unit 8 example written to your instructions
Whatever your Unit 8 prompt specifies, the firm, its exposures, required clauses or a template, send it with the rubric. The custom extract writes every limit as a number, prohibits by name and tests itself against sample proposals, with each outcome cited by clause. It is returned in 24-48h; no fee applies to the first. 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 8 questions, answered
How long should a treasury policy extract be?
Long enough to cover authority, instruments, limits, counterparties, segregation and reporting, and no longer. Three to five pages is common in course work. An extract is judged on whether each rule can be applied, so a short clause with a number in it outperforms a long paragraph of principles. Follow any length your prompt sets.
Should the policy allow any sold options?
Many corporate policies allow them only inside structures such as collars or participating forwards, and only against exposures the firm is sure of, so the sold leg can never exceed what the business will deliver. Naked sold options, written for premium income, are typically prohibited. Whatever your extract permits, state the condition inside the clause itself.
Why test the policy against proposals?
Because a rule that has never been applied may not work. Running two or three realistic trades through the clauses exposes gaps, such as a limit that fails to say whether it applies per trade or in aggregate. It also shows the grader that the extract is operational. Cite the clause number for each outcome so the reasoning can be followed.
Where can I find a free GF584 Unit 8 sample paper?
A full GF584 Unit 8 treasury policy extract is on this page, with numbered clauses on authority, instruments, corridors and counterparties, a test log of three proposals and APA 7 references.
Why was the bank's structure rejected?
Its amount doubled whenever the rate settled above the contract level. Clause 4.3 prohibits any instrument whose notional can increase as the market moves, so it fails before size or price is considered.