Hedge ratio: Difference between revisions
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* [[Hedge ]] | * [[Hedge ]] | ||
* [[Hedge accounting]] | * [[Hedge accounting]] | ||
* [[Hedge length]] | |||
* [[Hedging]] | * [[Hedging]] | ||
* [[Risk management]] | * [[Risk management]] | ||
Latest revision as of 20:08, 22 July 2025
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.
