Futures represent a contractual agreement to buy or sell a financial instrument or commodity at a fixed price on a fixed future date. Futures differ from forward contracts in that they are traded on an exchange while forwards are contracts between two parties. A crucial difference between an option [...]
Posts Tagged ‘risk’
July 2nd, 2009 - 9:07 pm § in Currency Risk
BENCHMARKS FOR CURRENCY RISK MANAGEMENT
Corporations can use a variety of hedging benchmarks to manage their hedging strategies more rigorously. Aside from the hedging level as the benchmark (e.g. 75%), corporations which want to limit fluctuation in net equity use the reporting period as the benchmark for forward hedging. Typically, US c[...]
July 1st, 2009 - 9:07 pm § in Currency Risk
HEDGING EMERGING MARKET CURRENCY RISK
Emerging market currencies have important characteristics which a corporation needs to take account of with specific regard to a currency hedging programme: Liquidity risk, Convertibility risk, Event risk, Jump risk. Discontinuous price action. Implied volatility is a very poor guide to future spot [...]