FX Hedging for Emerging Markets
Emerging Markets provide an exciting opportunity for investors and companies, with new growth opportunities 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 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.
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%.
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.
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.
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