Stage 1 — Executive Brief

Objective

• How to translate a market risk into business language a decision-maker acts on
• The three hedge families and the one-line trade-off of each
• How to scope a multi-stage analysis before building it

Learn — what the exposure actually is

Your scenario firm expects a foreign-currency payment, say EUR 4,500,000 in one year. The business risk in one sentence: the euro amount is fixed, but the dollar amount isn't.

If EURUSD = 1.10 at settlement →  4,500,000 × 1.10 = $4,950,000
If EURUSD = 1.00 at settlement →  4,500,000 × 1.00 = $4,500,000
                                            gap:      $450,000  ← a real budget hole

A 9% currency move, well within a normal year for EURUSD, swings proceeds by nearly half a million dollars. That's the story your brief opens with: currency, amount, timing, and what an adverse move does to USD cash flow.

Learn — the three hedge families, brief-sized

Before you write about these alternatives, spend twenty minutes in the FX Hedging Lab watching a forward, a money-market hedge, and an option priced side by side. Seeing the payoffs compute makes the brief's trade-offs concrete instead of abstract.

Do — commit to a prediction

The engagement brief's sections go in this same document, after the hedge families:

• What I am assuming: the assumptions you take as given, and which you would test with more time.
• Hypothesis: "I expect X because Y," in real quantities, with the mechanism you think decides it. It is a prediction about what the model will show, not a recommendation. The recommendation waits for Stage 5.
• How I would know I was wrong: the observation that would falsify the hypothesis.

Open the file with the brief's frontmatter, so a reader, or a model, knows what it is before reading it:

---
type: brief
engagement: fx-hedging
capability: fx-hedging
date: YYYY-MM-DD
status: committed          # committed | superseded
hypothesis: "One line: what you expect the model to show, and why"
---

Do — close on the next steps

Close the brief by previewing the machine you're about to build:

1. Stage 2 — Model specification: the workbook designed on paper: named ranges, tabs, formula logic, validation checks
2. Stage 3 — AI-assisted build + audit: an AI generates the workbook from your spec; you audit and fix its output
3. Stage 4 — Live market data: real, sourced, timestamped prices replace the placeholders
4. Stage 5 — Validate & decision memo: independent LLM run, hand verification, and the final call in a decision memo

This paragraph matters: it tells the CFO a process is coming, not a gut call.

Do — know where this project's files go

Stage 0 stood up your portfolio repo, and this project adds no folders to it. Every stage from here commits into a folder you already have: the spec and the workbook into the capability folder, capabilities/fx-hedging/, beside its README.md, the way the Micro & Macro Economics course keeps capabilities/marginal-analysis/.

firstname-lastname/
  capabilities/
    fx-hedging/        README.md, spec.md (Stage 2), model.xlsx (Stages 3–4)
  docs/
    decisions/         the executive brief, and the decision memo
  data/                market data, with source and timestamp
  analysis/            the build audit, and the validation work

Every graded file outside the capability folder carries the same prefix: YYYY-MM-DD-{scenario}-{type}, a real date, your scenario slug, and what the document is (brief, memo, analysis); the capability folder's files keep plain names, because the folder already says what they are. Note the split: the repo is named for you; individual files carry the date and scenario, so a folder full of them stays legible. Each stage page restates its own path, so you never have to come back here. This is the whole map in one place.

Deliverable

• Used the template-decision-memo.md as the starting structure
• Exposure stated precisely: currency, amount, settlement timing
• The risk quantified in USD terms (what an adverse move costs)
• All three hedge families covered with a pro and con each
• Next-steps roadmap previews Stages 2–5
• Filename follows the convention: YYYY-MM-DD-{scenario}-hedge-brief.md
• 400–600 words, executive tone
• Committed to docs/briefs/ and visible on GitHub
• capabilities/fx-hedging/README.md in place: Stages 2–4 commit beside it
• Engagement-brief frontmatter at the top: type: brief and a one-line hypothesis
• Assumptions listed; hypothesis stated as "I expect X because Y," with the observation that would prove it wrong

This project files the engagement brief in docs/briefs/ under the dated name above.

Check yourself