A flexible approach to hedging
REAL-LIFE PROBLEMS, INNOVATIVE SOLUTIONS
Case study A: flexi notional forwards
A flexi notional forward can fine-tune the hedged notional to more closely match realised cashflows and minimise the risk of being over- or under-hedged. This improves the efficiency of a hedge programme by reducing any earnings volatility when reconciling forecasted cashflows to realised cashflows.
Consider the following example: a European corporate has forecasted its 2006 USD revenues at $100 million with a +/-20% level of confidence ($80 million to $120
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