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Foreign Exchange: On balance sheet hedge

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Uploaded by on Aug 20, 2008

Yesterday I reviews Saunders' un-hedged bank: $200 million in U.S. dollar deposits fund investments which are split (50%/50%) between US dollar assets and British assets. We saw that un-hedged foreign currency exposure directly impacts returns in either direction (i.e., a material risk factor). In on-balance sheet hedging, the bank instead funds with $100 million in British Pound Sterling: the asset and liabilities are matched in regard to their foreign currency exposure (please note: this does not immunizes; asset/liability durations may different such that interest rate exposure remains).

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Uploader Comments (bionicturtledotcom)

  • Just seems like there should be an easier way to explain this.

  • @tradingheroes I'm sure there is

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  • thanks! was doing my assignment and really needed help, and i found this video!

    thanks again, bionic turtle!

  • great video! gives additional insights thanks : )

  • idiot

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