Applying Decision Theory to Improve Corporate Management of Currency-Exchange Risks

deVries M. G. , “The Magnitudes of Exchange Devaluation,” Finance and Development (June 1968), pp. 8–12.

See Lietaer B. A. , “Managing Risks in Foreign Exchange,” Harvard Business Review (March-April 1970), pp. 127–138.

Stobaugh R. , Money in the Multinational Enterprise: A Study of Financial Policy (New York: Basic Books, 1972).

Alternative approaches include those suggested by: Lietaer, op. cit.; Furlong W. L. , “Minimizing Foreign Exchange Losses,” Accounting Review (April 1966), pp. 244–252: Hoyt N. H. Jr. , “The Management of Currency Exchange Risk by the Singer Company,” Financial Management (Spring 1972), pp. 13–20; Verroen J. , “How ITT Manages Its Foreign Exchange,” Management Services (January-February 1965), pp. 27–33; and Foreign Exchange Exposure Management, Multinational Cash Management Group, Chemical Bank, New York, 1972.

Adapted from “The National Machine Company,” Parts A and B, Harvard Business School, No. 4-172-019, Boston, 1971.

See, for example, Raiffa H. , Decision Analysis: (Reading, Mass.: Addison-Wesley, 1968); McCreary E. A. , “How to Grow a Decision Tree,” Think (March-April 1967).

See, for example, Shilling D. , “Devaluation Risk and Forward Exchange Theory,” American. Economic Review (September 1970), pp. 721–727; Stoll H. R. , “An Empirical Study of the Forward Exchange Market Under Fixed and Flexible Exchange Rate Systems”, Canadian Journal of Economics (February 1968), pp. 55–78; and Siegel J. J. , “Risk, Interest Rates and the Forward Exchange,” Quarterly Journal of Economics (May 1972), pp. 303–309.

Hammond J. S. , “Better Decisions with Preference Theory,” Harvard Business Review (November-December 1967), pp. 123–141.

Ibid.