TMS Brokers w hedgingu
TMS Brokers uses a rigorous and disciplined approach to hedging, which is based on:
- Identification of all sources of currency risk in a business
- Accurate estimation of the risk exposure
- Continuous monitoring of currency risk positions
- Identifying optimal times to implement a strategy
- Analysis of the capital structure and credit portfolio modeling
- Dynamic management of hedge positions
- Comprehensive outcome evaluation
The effects of our analysis and recommendations are assessed using criteria defined with you. Your specific objectives are applied to establish performance metrics.
The Right Transaction at the Right Time
Even the most carefully planned strategy will not be successful, unless implemented at the right time. Our advisors monitor client’s currency exposures and identify optimal times for hedge strategy execution.
Proper timing is one of the most challenging tasks in currency market risk management. Both fundamental and technical analysis is employed by our specialists. Our advisors share their extensive knowledge on chart analysis at seminars and various training forums.
Rules of Effective Hedging
Here are the six rules of effective hedging that reflect TMS Brokers’ risk management approach:
- Hedge the Result -Offset liabilities and receivables in a given currency for a given time horizon. Hedge the resulting net position.
- Set the Hedge Ratio -Define what percentage of your overall currency risk is to be hedged and set the acceptable degree of exposure to currency risk.
- Diversify -Employ a range of financial instruments andtransact at several optimal market moments for enhanced hedging flexibility and effectiveness.
- Make Hedging a Priority -Execute hedging transactions prior to detrimental market moves. Thereafter, optimize your position in favourable markets
- Don’t go to Extremes –Neither inertia nor speculation serves your hedging purposes. Understand that inaction is speculative.
- Monitor the Market and Manage your Hedge Dynamically -Manage hedges actively. Do not hesitate to close out a hedge before maturity
The Polish currency market provides companies with access to so many currency risk management instruments that even an experienced investor may have difficulty choosing the right instrument. The fact that the right choice depends, in part, on accurate forecasts, further complicates the decision.
The Most Popular Instruments:
- Spot Transactions -Spot transactions are used to hedge current exchange rates. Companies that are in possession of a foreign currency may enter a spot transaction to exchange it for Polish zloty. The converted proceeds will be booked in the company’s account within two days. Conversely, having Polish zloty at its disposal, the company may, through a spot transaction, buy a foreign currency.
- Automatic Roll-Over of Spot Transactions -Companies using online trading platforms may automatically roll-over spot transactions. The advantage of this approach lies in the ability to lock in the current exchange rate, even if the payment date is undefined. This very flexible approach enables trading with resting orders to take advantage of exchange rate swings.
- Forward Transactions -Companies that have well-defined currency cash flows may limit currency risk through hedging an exchange rate in the future. Forward contracts secure a future exchange rate irrespective of subsequent market movements.
- Option Transactions -By transacting options, a company may effectively hedge against disadvantageous market movements, yet retain upside potential. Option transactions hedge the importer against higher exchange rates and may permit a positive return, if exchange rates move favorably. A Polish exporter who employs an option strategy will hedge against a stronger Polish zloty, yet retain upside potential from depreciation of the domestic currency.
- Cost-Free Option Transactions -If moderate currency swings have an inconsequential effect on your earnings, using an option strategy to hedge exchange rates within a range is a profitable strategy.