Currency Hedging Policy

Abstract

Based on recently available evidence, a fairly broad consensus on hedging policy appears to be emerging. We have included a copy and commentaries on four key currency hedging policy articles. Also included is a critique on Black's Universal Hedging Formula and a paper on short-term investing. The focus of this discussion is on defining an appropriate currency hedging policy, and not on the benefits of actively managing currencies. These two decisions are independent. Hedging policy defines the desired benchmark for a passive currency management program as well as for measuring active currency management performance, much as equity market indexes are typically utilized as benchmarks.