When it comes to deciding where to put their money, corporate treasurers tend to have a fairly simple palate. If they have excess foreign currency, the usual route involves placing it in bank deposit accounts where they can earn a steady interest rate.
While the rates offered on these accounts are far below what could be earned by putting the money into basic foreign exchange structured products, many companies have strict policies prohibiting them from doing so due to the products’ embedded optionality and the complex hedge accounting rules that apply to them.
But as interest rate differentials have made some currencies more expensive to hedge with FX forwards, many firms are reviewing their policies to include FX options as an alternative hedge. And as they become comfortable with options…
Read More
