Hedging Multiple Foreign Currencies
A cross hedge (sometimes called a proxy hedge) refers to hedging with an instrument that is not perfectly correlated with the exposure being …
derivatives
Currency Management for Emerging Market Currencies
The majority of investable asset value and FX transactions are in the six largest developed market currencies. Transactions in other …
Tools of Currency Management
Futures or forward contracts on currencies can be used to obtain full currency hedges, although most institutional investors prefer to …
Active Strategies/Tactical Decisions
Active Currency Management Based on Economic Fundamentals This approach assumes that, in the long term, currency value will converge to …
Strategic Decisions
There are a variety of approaches to currency management, ranging from trying to avoid all currency risk in a portfolio …
Effects of Currency on Portfolio Risk and Return
Domestic currency or home currency is the currency of the investor (or the currency in which portfolio results are reported and analyzed). Domestic …
FX Concepts
The Price and Base Currencies: The base currency is the denominator of the exchange rate and it is priced in terms of the numerator. Bid/Asked …
Derivatives on Volatility
With the introduction of volatility futures and variance swaps, many investors now consider volatility an asset class in itself. In …
Managing Equity Risk
Investors can achieve or modify their equity risk exposures using equity swaps and equity forwards and futures. Equity Swaps An …
Managing Currency Exposure
Currency swaps, forwards, and futures can be used to effectively alter currency risk exposures. Currency risk is the risk that …