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    FX solutions: Dynamic currency risk management

    FX solutions: Dynamic currency risk management

    18 April 2023 Solutions

    Traditional approaches to hedging effectively trade currency risk for cashflow volatility, and a dynamic approach attempts to solve these problems in three ways:

    1. Efficient cashflow management

    2. The potential to generate returns

    3. Increased diversification

    At the heart of our process is our currency engine: Alt-Risk Premia – quantitative in nature, fully modular, and employing a factor-based approach to currency management. Factor-based modelling aims to produce reliable and repeatable returns from currency. We outline how we build a factor-based strategy using:

    • Cross-sectional risk allocation: Creating a single diversified signal via allocating equal risk budgets to each factor signal
    • Time-series risk control: Automatically scaling risk up or down to meet tracking error targets
    Click here to read the full whitepaper
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