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DoubleDip

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tT
发表于 2011-7-11 19:42 | 只看该作者

Currency Cross hedge (Always Local vs X?)

currency, different, completely, understand
I understand cross hedge as Local curency vs a currency similar to home currency, but can it be between a currency similar to the local currency, and a currency similar to the domestic currency? i.e. 2 completely different currencies?

A proxy hedge is always Domestic vs similar (e.g. Yen instead of Remimbi)?

Thanks
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Chuckrox

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发表于 2011-7-11 19:42 | 只看该作者
I am fairly confident I remember reading that you can have two completely separate currencies.

anyone 2nd this?

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Unforseen

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发表于 2011-7-11 19:42 | 只看该作者
By Local I mean the foreign currency. Domestic is the home currency. Metsaregr8 we're on the same page - I'm just keen to establish if there's a slightly wider definition to cross hedge.

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skycfa

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发表于 2011-7-11 19:42 | 只看该作者
So if you had a GBP local portfolio and you were a USD domestic fund manager.

A cross hedge would be to: Sell GBP and buy EUR, then to sell EUR and buy USD.

A proxy hedge would be to sell EUR and buy USD.

Is that right?

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cityboy

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发表于 2011-7-11 19:42 | 只看该作者
Cross hedge you are transferring the currency risk for where you are invested into another currency all together.

A Proxy hedge you are hedging your investment in a foreign market with a currency that is highly correlated with it because of lack of liquidity in the 1st market.

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