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Insights, updates and learnings
Our GOAT blog: Calculating fx forward points
27/03/23
Our GOAT blog: Calculating fx forward points
Every year thousands of readers like you benefit from this common-sense approach to the calculation of foreign exchange (FX) forward points. First published 10 years ago, we regularly review and update the FX forward points content – this is the latest edition
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When to use zero-premium collar options as the method of hedging
30/08/21
When to use zero-premium collar options as the method of hedging
If it is not wise to always hedge via zero-premium collar options and you should never pay a premium to buy outright call and put currency options - what is the right approach?
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Hedge accounting FX options: time versus intrinsic value
23/08/21
Hedge accounting FX options: time versus intrinsic value
Learn how FX options lock in the certainty of worst case exchange rate outcomes while allowing participation in favourable rate movements.
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15/02/17
Impact of path dependent options
One of the difficulties companies face when using path dependent options, such as leveraged collars or participating forwards, is that the amount of cover in place will alter under different market conditions. Example: NZ based exporter hedging USD receipts to NZD FX product = leveraged collar Leverage ratio = 2...
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11/05/15
Know your position: FX Volatility, friend or foe?
The FX market is no stranger to volatility. Whether it is global economic or political uncertainties, or a country’s interest rate outlook, they all play out in the currency markets. The constant push and pull of both known and unknown information can lead to bouts of extreme volatility. FX traders...
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08/04/15
Using Hedgebook to make smart fx hedging decisions
Has anyone told you lately that they know where the currency is going? Lots of people think they know if it is going up or down but the reality is that no one knows where it is going in the next 5 minutes, 5 days or 5 years. We might...
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05/03/13
Hedging, and a deeper look into the types of Financial Hedges
Financial hedging involves buying and selling foreign exchange instruments that are dealt by banks and foreign exchange brokers. There are three common types of instruments used: forward contracts, currency options, and currency swaps.
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26/02/13
The Benefits of Hedging, and Managing FX Risk: Part 2
Managing this FX risk faced by importers and exporters all over the globe today is a three-step process: identify FX risk; develop a strategy; and utilized the proper instruments/strategies to hedge the risk.
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18/02/13
The Benefits of Hedging, and Managing FX Risk: Part 1
Many small- and medium-sized firms engaging in import and/or export activity tend not to hedge. The reasons not to hedge come in all shapes and sizes: it’s too complex; it’s too costly; there’s a misconception that it is speculation; or even that that firms don’t know about hedging tools and strategies available to them.
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11/02/13
Explaining Different Types of Exposure Risk
Importers and exporters alike face foreign exchange risk, or currency risk, when engaging in economic activity outside of their domestic currency. As explained in an earlier blog post, currency risk materializes for exporters when exchange rate volatility results in the company repatriating fewer revenues abroad, when the domestic currency strengthens relative to the foreign currency. For importers, this risk is the exact opposite: currency risk materializes when the domestic currency weakens relative to the foreign currency.
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04/12/12
Hedging Basics: A Currency Pair Risk Reversal
Learn about one of the most interesting strategies used by investors or treasurers to hedge their exposures to the currency markets: risk reversal.
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29/11/12
Hedging Basics: FX Hedging Using a Currency Put
Learn about one of the easiest and most effective ways to hedge a currency position, by purchasing a protective currency put.
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The Future of Interest Rate Swaps: Will Regulation Kill this Investment Vehicle?
12/10/12
The Future of Interest Rate Swaps: Will Regulation Kill this Investment Vehicle?
This is part 9 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 8, we discussed the role of interest rate swaps in the demise of Greece. Given the importance of swaps in the U.S. housing crash, new regulation has arisen that could threaten the future of this important financial derivative.
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The Euro-zone Crisis: Goldman Sachs, Greece, and Swaps
10/10/12
The Euro-zone Crisis: Goldman Sachs, Greece, and Swaps
This is part 8 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In parts 1 through 4, we discussed the differences between interest rate swaps and currency swaps, as well as the pricing mechanisms for fixed-for-floating, floating-for-floating, and fixed-for-fixed swaps. In part 8, we’ll discuss the role of swaps in more recent times: the Euro-zone crisis.
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05/10/12
Real World Example: Swaps Between Companies
In part 6 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy we provide a real world example of how swaps are constructed and executed.
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03/10/12
Swaps: A basic Q and A
This is part 5 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In parts 1 through 4, we discussed the differences between interest rate swaps and currency swaps, as well as the pricing mechanisms for fixed-for-floating, floating-for-floating, and fixed-for-fixed swaps. In part 5, we’ll review the basics before looking at some real world examples in parts 6 and 7.
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