Hedge ratio: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Add links.) |
imported>Doug Williamson (Add definition. Source - The Treasurer online - https://www.treasurers.org/hub/treasurer-magazine/corporates-act-mitigate-fx-volatility) |
||
| Line 1: | Line 1: | ||
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. | ||
| Line 9: | Line 11: | ||
= 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]] | |||
* [[Dynamic hedging]] | * [[Dynamic hedging]] | ||
* [[Foreign exchange risk]] | |||
* [[FX]] | |||
* [[Hedge ]] | * [[Hedge ]] | ||
* [[Hedge accounting]] | * [[Hedge accounting]] | ||
* [[Hedging]] | * [[Hedging]] | ||
* [[Risk management]] | |||
* [[Volatility]] | |||
[[Category:Manage_risks]] | [[Category:Manage_risks]] | ||
Revision as of 21:31, 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.
