Layered hedging - Revision history

Doug: Add links.

2024-02-29T00:57:05Z

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← Older revision		Revision as of 00:57, 29 February 2024
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	* [[Overhedging]]		* [[Overhedging]]
	* [[Pre-hedging]]		* [[Pre-hedging]]
	* [[Rolling FX forward ~~contract~~]]		* [[Rolling FX forward contracts]]
			* [[Rolling hedge]]
	* [[Underhedging]]		* [[Underhedging]]
	* [[Volatility]]		* [[Volatility]]

Doug: Mend link.

2024-02-28T23:01:42Z

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	* [[Overhedging]]		* [[Overhedging]]
	* [[Pre-hedging]]		* [[Pre-hedging]]
	* [[Rolling FX forward ~~contracts~~]]		* [[Rolling FX forward contract]]
	* [[Underhedging]]		* [[Underhedging]]
	* [[Volatility]]		* [[Volatility]]

Doug: Add link.

2024-02-28T23:01:21Z

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← Older revision		Revision as of 23:01, 28 February 2024
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	''Financial risk management - risk response - foreign exchange - hedging.''		''Financial risk management - risk response - foreign exchange - hedging.''

	A layered foreign exchange hedging programme hedges increasing proportions of foreign exchange exposures, as they come ~~closing~~ to maturity.		A layered foreign exchange hedging programme hedges increasing proportions of foreign exchange exposures, as they come closer to maturity.

	For example, six-month, 12-month and 18-month hedges might be executed in layered proportions, such as		For example, six-month, 12-month and 18-month hedges might be executed in layered proportions, such as
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	* [[Overhedging]]		* [[Overhedging]]
	* [[Pre-hedging]]		* [[Pre-hedging]]
			* [[Rolling FX forward contracts]]
	* [[Underhedging]]		* [[Underhedging]]
	* [[Volatility]]		* [[Volatility]]
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	*[http://www.treasurers.org/node/8925 Harness your hedges, April 2013]		*[http://www.treasurers.org/node/8925 Harness your hedges, April 2013]

	~~[[Category:Accounting,_tax_and_regulation]]~~
	~~[[Category:Financial_products_and_markets]]~~

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Financial_products_and_markets]]		[[Category:Financial_products_and_markets]]

Doug: Create page - sources - The Treasurer.

2024-02-28T00:46:29Z

Create page - sources - The Treasurer.

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''Financial risk management - risk response - foreign exchange - hedging.''

A layered foreign exchange hedging programme hedges increasing proportions of foreign exchange exposures, as they come closing to maturity.

For example, six-month, 12-month and 18-month hedges might be executed in layered proportions, such as
80%, 50% and 20% respectively.

Once the initial six-month (80%) hedge matures, the original 12-month hedge (50%), which now has six
months left to run, is topped up to 80% using a new 30% hedge.

In turn, the original 18-month hedge (20%), which now has 12 months to run, is topped up to 50%, also using a new 30% hedge.

A new 18-month hedge then captures 20% of the exposure, and so on.

A layered approach offers reduced volatility as - over time - it achieves a blended/averaged forward rate.

''(Source - Ashley Garvin - Harness your hedges - The Treasurer.)''

"We have a layered hedging policy, which guides us on how we hedge specific exposures. It is difficult to time specific events in the market; instead, we aim to average over a period of time."

''(Daniel Wong EMBA MScFin AMCT FCCA, head of corporate treasury, British American Tobacco - January 2024.)''

== See also ==
* [[Foreign exchange forward contract]]
* [[Hedging]]
* [[Overhedging]]
* [[Pre-hedging]]
* [[Underhedging]]
* [[Volatility]]

==Treasurer article==

*[http://www.treasurers.org/node/8925 Harness your hedges, April 2013]

[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]

[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]