KIKO(Knock-in Knock-out) currency option incurred huge amount of foreign exchange losses to Korean export firms during the global financial crisis of 2008. KIKO currency option was one of the most popular derivative instruments for many export firms to hedge foreign exchange risk from late 2007 to early 2008. The popularity of KIKO came with the financial situation,when the Korean Won had been smoothly appreciating and fairly stable. If the exchange rate moves between Knock-in and Knock-out rates, it could function more effectively than outright forwards as an hedging instrument with more favorable terms in price and fees. However, it could cause a serious foreign exchange loss if the exchange rate falls below the Knock-out rate or rise far above the Knock-in rate. Many export driven firms with small and medium size suffered from a huge amount of foreign exchange losses when the exchange rate for the Korean Won to the US dollar surged unexpectedly to record high level in 2008. The amount of loss was estimated to 3,225 billion Korean Won from 738 companies as of the end of June 2010. This case study analyzes the structure and specific features of KIKO currency option, the background for the rush of KIKO currency options, consequences of abrupt depreciation of Korean Won in 2008. The case gives valuable implications for firms and students to understand and experience the importance of foreign exchange risk management and the risks involved in financial derivative instruments.