6007LBSAF: AstraZeneca Case Study - Equilibrium between Financial Markets and Economic Activity - Finance Assignment Help

Assignment Task:

Learning Outcomes to be covered:

1. Identify causality and equilibrium between financial markets and economic activity, using appropriate theoretical models.
2. Use published market data in 'real-world' financial problems especially focusing on FX markets in terms of risk-taking as well as hedging risk exposures using appropriate strategies and instruments.

“AstraZeneca – how to manage FX exposure due to investment in Korea”
AstraZeneca, the second-largest UK pharmaceutical multinational, has agreed to pump a total of 800 billion South Korea Won, the largest investment plan by a foreign pharma firm in South Korea, over the next five years, in cooperative research projects for new drugs, to foster R&D experts and to improve access to healthcare.
The South Korean market attracts the attention of global pharma firms due to various measures by the government to nurture the broad bio-health sector. The country is ranked the sixth in the world as a clinical research hub, while Seoul is ranked the first in the world by the single city as a site for trials.
In February 2020, it is revealed that AstraZeneca has made a contract to inject the first installment of 300 billion South Korea Won by the end of the next year.
The contract exposed the company to currency risks. In consideration of such risk exposure, what actions should be taken to facilitate the deal? Or if no action, why?

You are required to produce an individual report (up to 2000 words, marking to cease after +10% of the limit) which considers these decisions in the light of the market data available. You should seek to incorporate the answers to the following questions in your report to support your arguments. 
•What type of currency risk exposure is this? What are the common principles and tools in the financial market for hedging this type of exposure? Compare the pros and cons of them.
•First, ignore the transaction costs and assuming that you want to hedge 100% the currency risk exposure, can you numerically demonstrate the two similar hedging strategies of forwarding and money market hedge? According to the current market data you find online, can you tell which one is better? What if the transaction costs of both are taken into consideration?
•Analyzing the historical currency price of SKW/GBP, what are your expectations of the future trend of SKW? Find analysts’ articles to support your prediction. With this expectation do you want to change your hedging percentage? 
•Use Google Scholar to do a simple literature review on the effectiveness of operational hedge on exchange rate risk, and advise the company accordingly?

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