Stage 1 — Executive Memo

What you'll learn

• 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

Understanding the exposure

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 memo opens with: currency, amount, timing, and what an adverse move does to USD cash flow.

The three hedge families (memo-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 memo's trade-offs concrete instead of abstract.

The "next steps" section — your project roadmap

Close the memo 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 — Validation & recommendation: independent LLM run, hand verification, and the final call

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

Set up this project's folders

Stage 0 stood up your portfolio repo. This project adds two folders to that skeleton, and every stage from here commits into one of them. Build them now, each with a one-line README.md inside — Git does not track an empty folder, so the README is what makes the folder exist — and no later stage stalls on housekeeping.

firstname-lastname/
  docs/
    decisions/         the framing memo, and the final recommendation
    specs/             add this — the model specification
  models/              add this whole branch
    builds/            the workbook you generate, then audit
  data/                market data, with source and timestamp
  analysis/            the build audit, and the validation work

Every graded file carries the same prefix — YYYY-MM-DD-{lastname}-{scenario-slug}, a real date, your last name, your scenario slug. 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.

Submission checklist

• 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-{lastname}-{scenario-slug}-hedge-framing.md
• 300–400 words, executive tone, one page
• Committed to docs/decisions/ and visible on GitHub
• Project folders created with a stub README.md in each

Rubric

Check yourself