You are a research analyst at Alcoa Inc. Currently, Alcoa Inc. purchases raw materials
(aluminum) in Brazil in the local currency (the Brazilian Real). Aloca needs to purchase aluminum in advance each month on the London Metal Exchange. Using the FX and
Commodity features in Bloomberg, answer the following questions:
1. What is the currency risk of Alcoa? Calculate the foreign currency exposure of Alcoa.
Type "FXIP" <Go> or hit currency key
Typle "OUTL" <Go>
Select 1 for interest rates forecasts
Select 2 or "FXFC" for foreign exchange forecasts
Select graph button next to forecast in spot column.
Select 3 for commodity price forecasts for Aluminum
Select 4 or "ECFC" <Go> for economic forecasts
For assessment of country risk:
Type "CSDR <Go>" to get sovereign debt ratings
Short Term Debt
Long Term Debt
Since Alcoa is an US based company, the currency risk of Alcoa is associated with the relative appreciation of the local currency (the Brazilian Real) against US dollar.
2. Alcoa currency has the following futures contract in place: “LYWA Comdty”. Does this contract appropriately hedge commodity risk?
F9 “Commodity” Tab
Select option one, “finding securities”
Then select “CTM” or “Contract Table Menu”
Then select option 31 “BMTL- base metal”
This shows all future spreads or swamp tickers available to view.
Make sure to sort by description so you could see all kinds of aluminum futures
The student should select one of the Aluminum future contracts and then choose the Contract Table.
Then look at the Base Metal Forward Curve by selecting Number 2: Chart CCRV
If you choose a new contract just be sure that the metal is aluminum or aluminum alloy.
3. How many spot prices are listed for European Crude Oil? How many products are listed for Crude oil and what are they?
Yellow commodity go---oil---BOIL Bloomberg spot oil (spot prices)---1)Crude 12)Europe
North Sea, Russia, and Mediterranean