Currency Basket Hedging
Date Issued
2006
Date
2006
Author(s)
Chang, Tsung-Tsao
DOI
zh-TW
Abstract
Abstract
In the present modern age, international businesses are tied more closely. Many global companies usually trade from one country to another, so “foreign exchange hedge” has become a key strategy to control the foreign exchange risk.
In the following context, I plan to provide a new method (currency basket hedging model) to reduce or improve the “foreign exchange hedge cost” which most companies have met so far.
With the “currency basket hedging model”, empirical analysis shows that this strategy is inexpensive. Averagely, instead of NDF, the currency basket hedging strategy has the advantage of saving hedging cost. Furthermore, its VaR estimate has a stable result.
Therefore, if the owner agrees to take the downside risk (correspond to a specific critical value of a portfolio’s potential one-day profit and loss probability distribution), the currency basket hedging strategy will be a feasible, usable, effective and referable strategy.
Subjects
貨幣投資組合
basket hedging
Type
thesis