货币风险管理：从理论到实践

Currency Risk Management: From Theory toPractice Strategist+44-20-754-75907 integrated framework for managing risk, return and liquidity at the total-fundlevel. The challenge, often described as the total portfolio approach (TPA), is nolongerwhetherTPAmakessenseintheory,buthowinstitutionscan implementit QuantitativeStrategist+44-20-754-52789 more central part of the discussion. We recently published Dynamic FX PortfolioHedging: A deep dive and why you should use it_and why and how to use acurrency signal on applying this principle to FX risk management. Since thepaperswerepublishedlastmonth,wehavediscussedtheseideaswithmorethan35 clients.Here, we summarise the main findings from our TPAstudyand recentclient conversations on implementing TPA in FX: Currency risk is often overlooked or managed in silos: Although this haslong been the norm, we are now seeing more interest in managingcurrencyriskmoreactively.Choosingnottohedgeisitselfariskdecisionand,if made passively.can affect portfolio outcomes.Across assetclasses,bond exposures are typically hedged more than equities, butclients responded positively to the idea of managing FX exposurescentrally.Regionally,the upcoming Dutch pension reforms are alsopromptingfundstotakeamoreactiveapproachtoFX risk. Defining the key objectives for currency risk management: While a veryfundamental yetdebated questionwasshouldonemanagecurrencyriskto add returns to the fund or asses it from the risk management angle.FX is itself an asset class and can generate returns in certaincircumstances. Our approach has been to build currency hedgingprogrammes that aim tomanage the stability or risk of the portfolio whiletrying to preserve the portfolio returns. There was consensus on lookingfor returns from core assets while looking to FX for operational efficiency. FX risk and benchmark-aware funds: An important theme in ourconversations was howto manage currency riskwithout straying toofarfrombenchmark performance.Many funds are measured against marketindicesthatareunhedged-forexample,equityportfoliosoftentracktheMsCI World. Another common reference point is peer performance.These practical constraints can be incorporated into ourframework andmay still allow for efficiency gains over standard approaches. Hedging instruments such as forwards and options: While forwardsremain the main tool for managing currency risk, options are becomingmore widely used. Their embedded cost efficiencies have made them maintain a fully hedged currency exposure are also using options tointroducemore flexibilityand improve efficiency.A deep dive into currency exposure beyond direct holdings:Another important theme was the need for a more holistic view of currencyexposure by looking beyond portfolio holdings to underlying economicexposure.For example,ifa fund ownsaUs stockwhosebusiness ismaterially exposedtothe Japaneseyen,thefund mayalsohave indirectyen exposure.While there is no simple way tomeasure this, one possibleapproach discussed was to review company annual and quarterly reportsto estimatethose exposures. more difficult in private markets because the timing and size of cashflows are uncertain. One emerging approach is to model expectedprivate-asset distributions under different scenarios, using long-termthat balance risk reduction against the carry cost of forwards andoptions. margin calls,especiallywhenthehedgemoves againstyou.Forexample,if a currency you are hedging against starts to strengthen, the hedgedposition canexperiencelarge swings.Whileourframeworkhelps answerwhether and how much to hedge, it also shows that hedging 100% withforwards is often inefficient because FX exposures change over time.Business solutions are available to help clients manage the resultingliquidity needs. FX Blog Appendix 1 The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specificrecommendation or view in this report. Vivek Anand, Rohini Grover, Ph.D.. Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced fromlocal exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subjectcompanies, and other sources. For further information regarding disclosures relevant to Deutsche Bank Research,pleasevisitourglobal disclosurelook-uppage onourwebsite athttps://research.db.com/Research/Disclosures/FICCDisclosures. Aside from within this report, important risk and conflict disclosures can also be found at https://research.db.com/Research/Disclosures/Disclaimer. Investors arestronglyencouragedtoreviewthisinformationbefore investing. FX Blog 'Deutsche Bank'). Though the information herein is believed to be reliable and has been obtained from public sourcesbelieved to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness