Thursday, October 19, 2017 New York : London: India: Tokyo:

EVALUATION OF HEDGED AND UNHEDGED EXPOSURES

I) HEDGED POSITIONS:

It is imperative for the company to evaluate the hedged positions on a periodical basis by comparing the hedged rates with the market rates for respective maturities to determine the opportunity gain or loss made by the company on the hedged portfolio.

The hedged rates are also required to be compared with benchmark rates to arrive at the notional gain or loss on the hedged positions. By suitable review of the above report the company can enhance the hedge efficiencies and evolve a plan for appropriate hedging strategies.

I) UNHEDGED EXPSOURES:

The unhedged exposures in each monthly bucket is required to be evaluated from time to time, by comparing the benchmark rates with the market rates for respective maturities to determine the notional gain or loss on the unheged exposures.

The unhedged exposures are to be evaluated separately for revenue on capital category of exposures. The approach to be followed for these two categories will be different and dependent on market outlook and forecast over the short-term medium term.

The unhedged exposures in non-dollar currencies are to be evaluated separately as the cross-currency risk on these exposures poses a challenge to the company in view of the extreme volatilities in the major currencies against US dollar.

The notional losses or gains determined out of exposure evaluation are to be monitored closely to decide the timing and appropriateness of the hedges.

 

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