Tiffany & Company

We recommend that Tiffany purchase Yen puts to protect against the downside risk of the possible depreciation of Yen, although this risk management instrument is more expensive, Tiffany can retain the upside gain if Yen continues to be strong, as has been the situation for the past 10 years. On the other hand, Tiffany does not need to fully hedge the ¥/$ risk, as Tiffany has many other international operations that would provide some degree of natural hedging of the US currency to various foreign currency fluctuations. Tiffany should purchase the put option with maturity as close as possible to the inventory repurchase schedule, while the retail income will need to be managed quarterly or yearly.…