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Hedging Currency Risk
Am currently looking into hedging currency risk. Aside from using forwards, NDFs, swaps, and options, any other creative means to do hedging? Structured products like acrrual notes, inverse floaters do provide cheap(er) ways to hedge...Any books or URLs that provides such info?More importantly, your ideas? (Assume that the currency is not liquid enough to have an options market)...
Hedging Currency Risk
Usually hedging isnt about "creativity", but its about neutralising risk. And the "optimal hedge" is something that has a high correlation to the exposure you will hedge, thats an instrument similar to what you hedge.
Hedging Currency Risk
Accrual notes & inverse floaters also expose you to a new set of risks, which need hedging unlessa) you are taking a proprietary viewb) the new risks are balancing out your books in some wayWhat am I missing?
Hedging Currency Risk
quanto options? this might be good when you don't know how much to hedge. an example is the nikkei contract traded at the CME. it's yen dominated but traded in dollars. john hull's book on options and derivatives should have a good explanatory paragraph on it.
Hedging Currency Risk
boludo....funny nickname....especially where i was born