Hedging decisions you can explain and repeat
A hedging policy says what is permitted. Choosing among the permitted alternatives, and showing why, is the harder part. Vantry supports a repeatable process for that choice: the same assumptions every time, an objective stated in advance, and analysis that can be revisited.
Policies say what is allowed, not how to choose
Most FX policies set hedge ratios and permitted instruments, but leave the choice between a forward, an option and a structure to judgement on the day. Over time, decisions drift with market sentiment and with the people involved, and become hard to defend once the outcome is known.
Inconsistent choices
Similar exposures are hedged differently from one quarter to the next, for reasons nobody recorded.
Judged on outcome
A hedge is called good or bad after the market has moved, rather than on what was known about it when it was placed.
Analysis that cannot be repeated
Spreadsheets and bank proposals use different assumptions, so alternatives are never compared on equal terms.
What the policy decides, and what the decision adds
The policy is set by the board or finance committee and changes rarely. The decision is made each time an exposure needs cover, within the policy's limits.
- Which exposures are hedged, and over what horizon
- Target hedge ratios by period
- Permitted instruments, and any limits on barriers or leverage
- Budget rates and worst case limits
- Who may approve trades, and at what amounts
- Which permitted structure suits this exposure now
- What each alternative gives up for its protection
- How each compares with a forward and with not hedging
- How likely each is to achieve the budget rate
- A record of the analysis behind the choice
Our treasury specialists can also help you document or review the policy itself. Treasury risk support.
A structured decision framework
Vantry ATI supports four steps. The analysis informs the decision; your team makes it, under the approval rules you set.
1. The policy sets the boundaries
Hedge targets, budget rates and worst case limits are recorded on each hedge layer, and only the structure families your policy permits are selected for evaluation.
2. The gap is measured
Exposure, existing hedges with every provider and the target give the amount still to hedge, period by period.
3. Alternatives are compared on equal terms
HedgeCore evaluates the permitted structures on one forecast and one set of market inputs, and ranks them on an objective chosen in advance: balance, expected value, protection or beating the budget rate.
4. The rationale is kept
Each run is saved with its inputs, and results and RiskCore reports export to PDF for the committee file. The chosen structure is then priced and executed by our dealing desk.
Vantry ATI DUDemonstration user | # | Strategy | Exp. value | VaR red. | Score |
|---|---|---|---|---|
| 1 | Forward | +$2,056 | 100% | 100 |
| 2 | Collar | +$1,551 | 94% | 83 |
| 3 | Forward extra | +$1,530 | 90% | 80 |
| 4 | Participating | +$309 | 84% | 45 |
| 5 | Vanilla | −$177 | 71% | 24 |
| 6 | Seagull | −$805 | 28% | 15 |
Consistent decisions, documented
The result is a hedging process that reads the same way to the treasury team, the CFO, the board and the auditor.
- Show how each hedge relates to the approved policy
- Compare a forward with an option or structure on the same basis
- Hedge firm commitments and forecasts on separate layers
- Measure every alternative against the budget rate
- Revisit a decision with the analysis that supported it
- Execute the chosen structure with Vantry
Related capabilities
HedgeCore
Hedge layers, strategy evaluation and objectives.
Vantry ATIRiskCore
The outcome profile of the structure you choose.
Financial servicesTreasury risk support
Help drafting, reviewing and applying a policy.
Learning centerDeveloping an FX policy
Governance, hedge ratios and mandates, step by step.
Discuss your hedging policy and decision framework
Tell us how hedging decisions are made today. We will show how the same policy would be applied in Vantry ATI, with your exposures.