Portfolio currency hedging 101 – Impacts and costs – What you need to understand
There is a lot of confusion and uncertainty when I discuss portfolio currency hedging with investors. I often meet the expression «hedging cost» and it often refers to the interest rate differentials (long the interbank rate you hedge to and short the interbank rate you hedge from). This is not the real hedge cost, but the hedge impact. The hedge cost is OTC trading costs, credit risk and bid/offer imbalance. Confused already?
The Norwegian krone’s correlation to the Brent oil price
«When the oil price tanks eyes turns to the NOKie». We often see the Brent oil price as a factor for explanation of the moves in the Norwegian krone (NOK) versus other currencies, but how does it really work over time? We have been looking closer to this relationship and have some interesting findings. These findings can be split in three levels:
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