Can anyone tell me the difference between using 30 days instead of 90 days forward contract (FX) to hedge an overseas portfolio ?Thanks

60 days?I'm not sure what you mean. The obvious answer is a 90-day forward will have long exposure to the sold currency's interest rate and short exposure to the bought currency's interest rate.As a first approximation, the best hedge will have a delivery date equal to the duration of the portfolio. That will hedge the first derivative with respect to interest rates.If you're talking about major currencies, the spot FX risk is much larger than the spread between the 30-day and 90-day interest rate differential. A 1% change in spot rate changes the contract value 1%. The equivalent probability move in the spread is generally only a few basis points, and you have to divide this by 6 (approximately) because you are only exposed for 60 days. So there is not a lot of risk difference between the two delivery intervals, so you might prefer one or the other for liquidity or transaction cost reasons.

Sorry Aaron, which one is more liquid 30 days or 90 days ?Thanks

Generally 30 days, but it depends on the market. Most futures are most liquid in the near month. If you're doing major currencies, you should get plenty of liquidity on 30, 60 and 90 days. On the other hand, 30 day hedging means monthly roll overs. If your position does not require much rebalancing, 90 day hedging might save a lot of trouble and transaction expense. You might also want to play the yield curve a bit and take the cheapest hedge, which depends on whether the spread between the 30 day interest rates in the two currencies is greater or less than the 90 day spread.My point is that there is probably not much difference between a 90 day hedge and rolling over 30 day hedges, so your choice is likely to be based on inclination and practical considerations.

<< Generally 30 days, but it depends on the market. Most futures are most liquid in the near month >>True! Whenever the front month future contract expire every 90 days (not exact, rather the third Monday of each expiration month) and it generally the most liquid contract. However, options on the currency futures tend to be liquid in their front expiration either. In other words, the 30 days front month options are the most liquidity option contracts that expire every 30 days. With options, you can create a synthetic future contact and liquidity as well the spread will be very crucial. Therefore, in the 30 days time frame, there are plenty of possibilities to hedge a FX portfolio. David