1. Case 3.1: Foreign Exchange Trading At Baldwin Enterprise
Bjarne Berg
Bong-Keun Jeong

2. Background A manufacturing company operated in several countries
Maintain cash assets: US dollar (USD), Euro (EUR), Pound (GBP), Hong Kong dollar (HKD), and Japanese yen (JPY)
To meet the different cash flow requirements, Baldwin often moves funds one place to another through the foreign exchange (FX) market

3. Background
The FX market buy and sell different currencies (same as stock market)
Bid price: the price that market is willing to buy a particular currency
Ask price: the price that market is willing to sell
Ask price > bid price (transaction profit/cost)

4. Current FX Rates at Baldwin
USD
EUR
GBP
HKD
JPY 1
0.6409
7.7985
118.55
0.9724
0.6295
7.6552
116.41
1.5593
1.5581
12.154
184.97
0.1304
0.0821
0.0054
0.0658
One GBP (pound)  1 * USD (US dollar)  1 * * = (pound)

5. Transaction Cost USD EUR GBP HKD JPY 1.000000 0.009474 0.000645
USD
EUR
GBP
HKD
JPY

6. Problem Statement Objective: Design a currency trading plan that
minimize transaction costs
Requirements
Current holding
Target holding
USD
2 million
250,000
EUR
5 million
8 million
GBP
1 million
Equivalent of at least 250,000 US
HKD
3 million
JPY
30 million
54 million