Foreign Exchange: On balance sheet hedge

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).

Channel: Education
Uploaded: November 30, 1999 at 12:00 am
Author: bionicturtledotcom

Length: 08:43
Rating: 5.0
Views: 6800

Tags: Finance risk foreign currency exchange fx

Video Comments

naixieweix (November 30, 1999 at 12:00 am)

thanks! was doing my assignment and really needed help, and i found this video! thanks again, bionic turtle!

bionicturtledotcom (November 30, 1999 at 12:00 am)

@tradingheroes I'm sure there is

tradingheroes (November 30, 1999 at 12:00 am)

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

TheOverlord23 (November 30, 1999 at 12:00 am)

great video! gives additional insights thanks : )

balistik001 (November 30, 1999 at 12:00 am)

idiot