1. What are Aspen Technology´s main Exchange rate exposures? Aspen Technologic Inc, is firm specialized in the development of simulation software for customers in process manufacturing industries, particularly the chemical industry. Big part of the AspenTech earnings comes for the licenses of their existing products. The 52% of Aspen Tech’s software license revenues came from customers outside de United States. With most, but not all, of its expenses incurred in the United States and a material fraction of its sales abroad in yen, pound sterling, and DM. Aspen Tech had long been exposed to currency fluctuations.
2. How does Aspen Tech’s business strategy give rise to these exposures as well as to the firm’s financial need? AspenTech sold both dollar-dominated and foreign currency-dominated receivables. With dollar-dominated receivables, GE and Sanwa (financial intermediaries) discounted the promised lease payments by a rate that depended on the prevailing US treasury rate and the location of the license. With foreign currency-dominated contract, AspenTech received US dollars immediately from its counterparties, with the amount depending on interest rate and forward exchange rates, plus a contractual spread. AspenTech strategy was to pass the interest rate spreads and other terms of its agreements with GE and Sanwa directly to its customers through the pricing and contractual terms of its licenses. Thus, for any receivables that if converted immediately after license sale tit receives a certain US dollar amount up-front, equal the license fee that the customer has paid.