CURRENCY OPTIONS: Hedging and Overlays

By Dr. David Edward Marcinko MBA MEd

SPONSOR: http://www.MarcinkoAssociates.com

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Currency Hedging is a risk-management strategy, as part of a foreign investment strategy, currency hedging is designed to reduce the impact from changes in the relative values of currencies involved in the foreign investment strategy.

CITE: https://www.r2library.com/Resource/Title/0826102549

In any foreign investment strategy, a significant part of the potential risk and return comes from exposure to relative currency value fluctuations. If exposure to those currency fluctuations is minimized, investors can experience more of a “pure play” exposure to the foreign investments. There is a variety of possible currency hedging strategies, ranging from swaps, options, and spot contracts to simply buying foreign currencies.

Currency Overlay is a financial trading strategy used to separate the management of currency risk from other portfolio strategies. A currency overlay manager can seek to hedge the risk from adverse movements in exchange rates, and/or attempt to profit from tactical currency views.

CITE: https://www.r2library.com/Resource/Title/0826102549

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