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FX Hedging for Emerging Markets 

FX Proxy Hedging diagram

Emerging Markets

Emerging Markets provide an exciting opportunity for investors and companies, with new areas for growth and reduced competition. However, these region’s currencies can cause an expensive headache. Hedging exotic or illiquid currencies is often inefficient and in some cases, there are no viable options.

 

Our unique approach to FX proxy hedging minimizes the hedging costs of illiquid and exotic currency pairs by utilizing our algorithmic-based optimization tool. 

 

Our pioneering tool, uses a unique application of Bayesian regression and identifies a basket of currencies with sufficient correlations to act as a proxy and mirror your target currency. Our proxy baskets are more liquid and can be hedged at significantly lower costs.

 FX proxy vs traditional hedging costs chart

Reduce the Cost of Hedging

Currencies like ZAR, MXN, KES have always been expensive or complicated to hedge, with many looking to forgo the hedging in order to save money at the risk of investor returns.

 

Our tool enables us to reduce the hedging costs of many emerging market currencies by up to 80% whilst ensuring a correlation of > 75%.

Hedging Illiquid Currencies

Currencies like ARS, EGP etc don't have a derivative market for traditional hedging.

 

Our tool enables us to create a highly correlated proxy basket in order for our clients to hedge the previously unhedgeable currencies.

FX Proxy vs Actual Line graph
Basket of currencies for FX hedging pie chart

Using Majors to Hedge Minors

The basket currency approach is a unique hedging tool that allows the holder to utilize a basket of liquid and low costing major currencies to hedge a minor.

 

This has meant lower spreads and far more willing counter-parties.

Want To Learn More About FX Hedging for Emerging Markets?

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Learn More About Our Solutions

If you are interested in finding out more about our services or speaking to one of our team, please reach out to us on:

info@deaglo.com