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brain_wash_your

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tT
发表于 2011-7-11 18:59 | 只看该作者

Proxy and Cross hedge

investor, directly, currency, investing, different
I don't know why I'm having trouble, but I'm very clear on proxy hedge, but can someone tell me the HOW currency cross hedging is different from proxy hedge?

See if my logic is correct, proxy hedge: you are a local investor (USD) investing in GBP denominated bond, and you proxy hedge USD to EUR.

In a cross hedge, your long GBP bond exposure is directly hedged with a EUR (GBP-EUR)? Does this mean that you still have EUR exposure and have to somehow bring EUR back to USD?

 

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Analti_Calte

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发表于 2011-7-11 18:59 | 只看该作者
I remember L2 had some bid-ask stuff on fx transactions. Maybe if you include bid-ask on 2 different contracts if would be very inefficient compared to a single direct hedge

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Chuckrox

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3#
发表于 2011-7-11 18:59 | 只看该作者
janakisri Wrote:
-------------------------------------------------------
> I remember L2 had some bid-ask stuff on fx
> transactions. Maybe if you include bid-ask on 2
> different contracts if would be very inefficient
> compared to a single direct hedge

Right, but the cross hedge will give the manager the exposure that they want. While a proxy hedge will only approximate the currency they are looking to hedge.

NO EXCUSES

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