Hedge ratio: Difference between revisions
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imported>Doug Williamson (Add definition. Source - The Treasurer online - https://www.treasurers.org/hub/treasurer-magazine/corporates-act-mitigate-fx-volatility) |
imported>Doug Williamson (Update links.) |
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* [[Bottom line]] | * [[Bottom line]] | ||
* [[Corporate]] | * [[Corporate]] | ||
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* [[Foreign exchange risk]] | * [[Foreign exchange risk]] | ||
* [[FX]] | * [[FX]] | ||
Latest revision as of 21:34, 13 October 2022
1. Hedging instruments.
The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself.
Example
If four options are required to hedge a position of one unit of the underlying asset:
Hedge ratio = ¼
= 0.25.
2. Risk management.
The proportion of a risk exposure that an organisation chooses to hedge.
Also known as a hedging ratio.
- Corporates increase FX hedging
- “While there will always be some [corporates] that don’t hedge their FX risk at all, those that haven’t are now considering doing so given recent market volatility and negative currency impacts.
- “Those corporates that already had formal hedging programmes in place are now increasing their hedge ratios to protect their bottom lines.”
- Eric Huttman, CEO at MillTechFX, The Treasurer online - 14 October 2022.
