Hedge ratio: Difference between revisions
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1. ''Hedging instruments.'' | |||
The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself. | The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself. | ||
the | '''Example''' | ||
If four options are required to hedge a position of one unit of the underlying asset: | |||
Hedge ratio = ¼ | |||
= 0.25. | = 0.25. | ||
2. ''Risk management.'' | |||
The proportion of a risk exposure that an organisation chooses to hedge. | |||
Also known as a hedging ratio. | |||
:<span style="color:#4B0082">'''''Corporates increase FX hedging'''''</span> | |||
:“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.'' | |||
== See also == | == See also == | ||
* [[ | * [[Bottom line]] | ||
* [[Corporate]] | |||
* [[Exposure]] | |||
* [[Foreign exchange risk]] | |||
* [[FX]] | |||
* [[Hedge ]] | |||
* [[Hedge accounting]] | |||
* [[Hedging]] | |||
* [[Risk management]] | |||
* [[Volatility]] | |||
[[Category:Manage_risks]] | |||
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.
