The World After Brexit Over the last few days, we’ve already spoken with numerous clients about the potential financial and regulatory impacts of the UK’s vote to leave the European Union. As the referendum’s outcome reverberates through the markets, here are a few key notes: 1) What happened in financial markets? The British pound plummeted 12% overnight from Thursday, nearly doubling its worst ever one-day percentage loss that occurred in 1992 when it came under speculative attack and fell out of the ERM – it has continued to fall sharply today. The euro also weakened substantially, while the Japanese yen strengthened considerably as the safe-haven currency of choice (the Swiss franc’s pressure to appreciate was mitigated by Swiss Central Bank activity). Bonds from the US to the UK to Germany rose sharply, anticipating expansionary monetary policy to ward off recession.…

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Hedging Lessons from Brexit On Thursday, British citizens will vote in a referendum posing this question – “Should the United Kingdom remain a member of the European Union or leave the European Union?” The result will have sweeping implications for trade policy, the flow of immigrants, and even the continued viability of the European Union. Hence, as the referendum’s projected outcome has shifted from Remain to Leave and back again, worldwide currency, interest rate, and equity markets have swung wildly. As a global company with operations in the UK and Europe, we’ve been monitoring the referendum buildup closely. In addition to its anticipated economic and political impacts, there are also numerous valuable risk management lessons, including (1) The best time to buy insurance: The cost of seasonal hurricane insurance on an Outer Banks home skyrockets once there’s already a Category…

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LinkedIn Pulse: Foreign Exchange Risk in 2016: Laying the Foundations for Managing Value By Victoria Bell March 3, 2016 With the UK Referendum on EU membership scheduled for 23 June 2016, currency volatility is front and centre of many companies’ agendas. However, for businesses with multi-currency operations, volatility has been a concern for some time and the recent slide in Sterling is one of many considerations, with the US Presidential election, the stability of the Eurozone and the growth prospects for China ever present in the background. Company boards, Audit Committees and shareholders are increasingly considering risk management strategies in relation to foreign exchange, questioning whether their current strategy remains relevant in changed and changing market conditions. Questions we hear on a regular basis include: What happens to our business if GBP-USD moves 10%? Why would I take risk management…

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What a few weeks we’ve just lived through in the financial markets, with no shortage of turbulence, turmoil, and downright tribulation across the world. The S&P 500 tumbled more than one hundred points last week, a dubious distinction it had not achieved since the grim days of October 2008 – as of this writing, it’s fallen more than fifty points in a single morning. China’s yuan (partially) and Kazakhstan’s tenge (entirely) shifted to a freely floating currency from central management, causing the former to fall materially and the latter to plummet precipitously. A barrel of crude oil cost 32% less than it did at the outset of July. Against this backdrop of coordinated devaluating pressure, it’s no surprise that market volatility measures have jumped considerably. 2-year cap volatility, a measure of the cost of insuring against rising interest rates, has…

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Now that Election Day is nearly a week behind us, the bunting has all been put away and the confetti swept from the streets…wait, this was a midterm election, so maybe no bunting or confetti, but at least TV ads are back to selling, not slinging, and a few yard signs have come down. For all the glamour and hype that a midterm election typically lacks, this one saw big change across the nation. But whether you experienced elation or devastation…wait, midterm year, make that modest content or mild disappointment, one fact remains: what happened on Tuesday was not without precedent. Some call it the Six-Year Itch, others the Six-Year Curse, but whatever you call it, there is a phenomenon that has been playing out over the last 100 years wherein whichever political party has held the White House for…

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Managing foreign currencies risk Real estate companies are increasingly diversifying their portfolios by investing in assets abroad. Understanding these exposures and how to protect against foreign currency swings are key to making the right investment decisions. Chatham Financial serves real estate clients to effectively manage their FX risk across a broad spectrum of currencies. We help our clients understand their exposure, quantify, and mitigate their FX risk. FX Hedging to protect against volatility Tailored risk assessment and analysis: Each FX hedging solution involves analyzing the underlying exposure, netting of those exposures, currency hedging order and evaluating hedging alternatives. Chatham evaluates where currency hedging can cause more volatility and we identify areas for natural hedging. We provide informed recommendations and arm our clients with all the necessary data to make prudent hedging decisions. Comprehensive execution process: Expert consultants, proprietary models, and…

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