Managing Risk and Opportunity through Uncertainty

EMERGING MARKET RISK While 82% of respondents reported having exposures to currencies outside the G10, over half (78%) report either hedging EM and G10 exposures the same, or essentially not hedging EM at all. Costs, market liquidity, and local regulatory considerations were cited as the primary concerns when managing EM currency risk. 46% Hedging costs/negative forward points 39% Lack of liquidity 30% Meeting local regulatory approvals and requirements 17% Limited hedging instrument selection 16% Basis risk between the onshore and offshore NDF markets 12% Settlement risk 8% All of the above 5% Other Emerging Market Currency Risk Management Concerns Hedging Approach to Managing Emerging Market Currencies 78% All currencies hedged the same G10 currencies hedged; EM currency risks not Forecasted EM risks hedged but for shorter tenors than G10 G10 BS exposures hedged 100%; EM hedged very selectively/not at all More options used for EM risks to avoid negative forward points Percent of Respondents with Exposures to Currencies Outside the G10 Currencies 82% 18% 11% 18% 49% 6% 20 21