FX Hedging Facility: Lab Instrument Analysis

Arsalan farooquee; Saurabh Trivedi; Gireesh Shrimali

FX Hedging Facility: Lab Instrument Analysis

Arsalan farooquee, Saurabh Trivedi, Gireesh Shrimali

Research output: Book/Report › Commissioned report › peer-review

Abstract

The FX Hedging Facility is a customizable currency hedging product comprised of a foreign exchange (FX) hedging facility backed by an FX tail risk guarantee. The mechanism targets a particular tranche of FX risk and allows allocation of risks to suitable parties, and also eliminates the credit risk premium otherwise charged in a commercial currency swap. This product has the potential to reduce the hedging cost by ~30% while mobilizing a minimum of $9 of foreign capital per dollar of subsidy with more than 50% probability that the entire subsidy will be recovered.

Original language	English
Publisher	Climate Policy Initiative
Commissioning body	Shakti Sustainable Energy Foundation
Number of pages	23
Publication status	Published - Oct 2016
Externally published	Yes

Bibliographical note

Analytical and secretariat work of the India Lab has been funded by Shakti Sustainable Energy Foundation, the David and Lucile Packard Foundation, and the UK Government. Climate Policy Initiative’s team in Delhi serves as Lab Secretariat and analytical provider.

Access to Document

https://www.climatefinancelab.org/project/fx-hedging-facility/

Cite this

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title = "FX Hedging Facility: Lab Instrument Analysis",

abstract = "The FX Hedging Facility is a customizable currency hedging product comprised of a foreign exchange (FX) hedging facility backed by an FX tail risk guarantee. The mechanism targets a particular tranche of FX risk and allows allocation of risks to suitable parties, and also eliminates the credit risk premium otherwise charged in a commercial currency swap. This product has the potential to reduce the hedging cost by ~30% while mobilizing a minimum of $9 of foreign capital per dollar of subsidy with more than 50% probability that the entire subsidy will be recovered.",

author = "Arsalan farooquee and Saurabh Trivedi and Gireesh Shrimali",

note = "Analytical and secretariat work of the India Lab has been funded by Shakti Sustainable Energy Foundation, the David and Lucile Packard Foundation, and the UK Government. Climate Policy Initiative{\textquoteright}s team in Delhi serves as Lab Secretariat and analytical provider.",

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AU - farooquee, Arsalan

AU - Trivedi, Saurabh

AU - Shrimali, Gireesh

N1 - Analytical and secretariat work of the India Lab has been funded by Shakti Sustainable Energy Foundation, the David and Lucile Packard Foundation, and the UK Government. Climate Policy Initiative’s team in Delhi serves as Lab Secretariat and analytical provider.

PY - 2016/10

Y1 - 2016/10

N2 - The FX Hedging Facility is a customizable currency hedging product comprised of a foreign exchange (FX) hedging facility backed by an FX tail risk guarantee. The mechanism targets a particular tranche of FX risk and allows allocation of risks to suitable parties, and also eliminates the credit risk premium otherwise charged in a commercial currency swap. This product has the potential to reduce the hedging cost by ~30% while mobilizing a minimum of $9 of foreign capital per dollar of subsidy with more than 50% probability that the entire subsidy will be recovered.

AB - The FX Hedging Facility is a customizable currency hedging product comprised of a foreign exchange (FX) hedging facility backed by an FX tail risk guarantee. The mechanism targets a particular tranche of FX risk and allows allocation of risks to suitable parties, and also eliminates the credit risk premium otherwise charged in a commercial currency swap. This product has the potential to reduce the hedging cost by ~30% while mobilizing a minimum of $9 of foreign capital per dollar of subsidy with more than 50% probability that the entire subsidy will be recovered.

M3 - Commissioned report

BT - FX Hedging Facility

PB - Climate Policy Initiative

ER -

FX Hedging Facility: Lab Instrument Analysis

Abstract

Bibliographical note

Access to Document

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Cite this