Do you have 2020 vision on your FX transactions?
Private Equity | London
SummaryRead our analysis on how best to hedge FX risks and how we advise funds and businesses on optimal pricing for their FX transactions.
2019 saw a marked increase in the number of enquiries we received over how best to hedge FX risks.
As we kick off the new decade, we expect this trend to continue, and the significant cost savings we have been able to achieve for clients with it. Chatham Financial advocates for transparency in financial markets and we offer impartial advice on how to get the best price for the most suitable product when hedging financial risks.
Assessing the pricing of FX hedges is complex. The underlying exchange rate, execution charges, forward points and credit charges are all moving parts that need to be negotiated to ensure a fair trade. Chatham Financial has a wealth of market experience and a wide range of analytical tools to help our clients optimize their hedging. Whether you manage a business or a fund, the savings can be significant.
One recent deal in the real estate sector saw us negotiate improvements to FX hedge pricing representing €300K of value for a transaction on a €60M notional – a valuable payoff for our client.
In addition to one-off hedging requirements, we also advise funds and businesses on optimal pricing for their FX transactions on an ongoing basis. Here, the savings can run into millions for those exposed to a high degree of FX risk.
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This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.
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An FX forward is a contractual agreement between the client and the bank, or a non-bank provider, to exchange a pair of currencies at a set rate on a future date.
An FX option is a contract that confers on the holder the right but not the obligation to exchange an amount of one currency for another at a pre-agreed rate (strike rate) on or before a pre-agreed date.