HedgingEurope Finance
Europe Finance (est. 2008) is the first and the only one company in                      Russia which develops and promote...
Europe Finance SolutionsComputational Finance collect all advantages of classichedging instruments and are oriented exclus...
Wall Street                      What is this all                        About?How can it Benefit?
Market makers          Market makers and political games           create a lot of unmanaged risks
Does it Matter?        Currency and commodity risks have          significant impact on business
Currency risk example
Interest rate risk example
Real example - Oil crisis                                        Summer, 2008. Oil                                        ...
Risk management   Hedging is a financial risk   management technic that reduces   unfavorable outcome of market   changes....
Is Hedging Useless?       “Hedging doesn’t make real value in       long term perspective due to associated       costs. W...
Useless?Ignoring of hedging resulted for British Airways in:                 7,260 canceled flights                  £564,...
We are hedging…    “If we don’t hedge jet fuel price risk, we    are speculating. It is our fiduciary duty    to try and h...
Oil crisis results         75 jets grounded                                  50 jets grounded    6000 employees discharged...
Southwest Airlines results        14 Jets launched        800 employees hired       Net Profit increased in 33%
Hedging                                   Saving moneyIndependence        Accurate                                       u...
Hedging InstrumentsFutures/Forward:          Option:         Combination:liability insurance   right of choice   individua...
Hedging instruments        Forward/Futures:                             Option:        liability insurance                ...
Active Hedging StrategiesActive Hedging Strategies – risk-free, non-speculative strategies withthe only advantages of clas...
Hedging Strategies         Passive                           ActiveThe strategy allows to fix an   The strategy allows to ...
Example   100% currency risk protection. Opposite to passive hedging, active hedging   allows to profit from positive mark...
Innovative approachUse innovative approach to be more successful                 and secured                 Thank you!
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Hedging for students

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Hedging for students

  1. 1. HedgingEurope Finance
  2. 2. Europe Finance (est. 2008) is the first and the only one company in Russia which develops and promotes financial products of absolute profitability, combining best practices and tools of world’s leading hedge funds.Europe Finance Products and Services Our Best Clients Financial Engineering - Financial flows optimization - Loan Interest Rate reduction Market Risk Hedging Our Key Partners - Currency risk - Commodity risk - Float Interest Rate risk Hedge Funds Development and Support
  3. 3. Europe Finance SolutionsComputational Finance collect all advantages of classichedging instruments and are oriented exclusively on solution Market Risksof individual business tasks. Nowadays Europe Finance is Hedgingactively using around 150 variants of Active DerivativeStrategies.Unique experience of hedge-funds and world leadingtreasury departments Free Cash Flow Financial Decreasing Management Interest Rates Engineering Detailed business analysis Strategy creation without speculative operations Individual consultations and personal derivative experts Wide range of banks partner Positive Cash Better exchange rate and OTC instrument prices Flow Creation
  4. 4. Wall Street What is this all About?How can it Benefit?
  5. 5. Market makers Market makers and political games create a lot of unmanaged risks
  6. 6. Does it Matter? Currency and commodity risks have significant impact on business
  7. 7. Currency risk example
  8. 8. Interest rate risk example
  9. 9. Real example - Oil crisis Summer, 2008. Oil peak price $147 Oil Price $5.2 billion losses in 2008 • Hard to forecast financial flows Spring, 2009. Fall • Market losses down to $40Results450 jets grounded 65+ jets 75+ jets25,000 employees discharged 6,000+ employees 3,000+ employees The on profitable company during the period100+ jets 50+ jets 10+ jets 45+ jets 14 jets launched5,500+ employees 500+ employees 1,700+ employees 2,500+ employees
  10. 10. Risk management Hedging is a financial risk management technic that reduces unfavorable outcome of market changes. E.g. currency and commodity risks
  11. 11. Is Hedging Useless? “Hedging doesn’t make real value in long term perspective due to associated costs. We consider hedging not efficient.” Rod Eddington, CEO British Airways
  12. 12. Useless?Ignoring of hedging resulted for British Airways in: 7,260 canceled flights £564,000,000 losses
  13. 13. We are hedging… “If we don’t hedge jet fuel price risk, we are speculating. It is our fiduciary duty to try and hedge this risk” Scott Topping, CFO Southwest Airlines
  14. 14. Oil crisis results 75 jets grounded 50 jets grounded 6000 employees discharged 500 employees discharged 14 jets launched 800 employees hired 65 jets grounded 3500 employees discharged 100 jets grounded5500 employees discharged 45 jets grounded 2500 employees discharged
  15. 15. Southwest Airlines results 14 Jets launched 800 employees hired Net Profit increased in 33%
  16. 16. Hedging Saving moneyIndependence Accurate under Better financial from rate financial flows unfavorable conditions oscillations forecasting conditions
  17. 17. Hedging InstrumentsFutures/Forward: Option: Combination:liability insurance right of choice individual solution
  18. 18. Hedging instruments Forward/Futures: Option: liability insurance right of choiceAllow to reduce risks when negative Allow to reduce risks when negative market situation market situation Futures/Forward is almost free Allow to create advantages when instrument positive market situationCan’t provide with advantages when Costs a lot of money positive market situation
  19. 19. Active Hedging StrategiesActive Hedging Strategies – risk-free, non-speculative strategies withthe only advantages of classic hedging instruments: Allow to reduce risks when negative Allow to reduce risks when negative market situation market situation Futures/Forward is almost free Allow to create advantages when instrument positive market situation Can’t provide with advantages when Costs a lot of money positive market situation As a result you receive costs-free instrument that provide you with possibility of using negative and positive market situation with maximum advantages for your business
  20. 20. Hedging Strategies Passive ActiveThe strategy allows to fix an The strategy allows to fix theexchange rate that fits your exchange rate as well as openbusiness, guaranteeing total opportunity for profiting currency risk protection from favorable market conditions
  21. 21. Example 100% currency risk protection. Opposite to passive hedging, active hedging allows to profit from positive market conditions40.8000 €/Р option strike40.6000 forward The strategy close40.4000 would save40.2000 1 455 000 RUR40.0000 0,4 RUR for 300 000 EUR39.8000 right to decline the contract contract39.6000 forward39.4000 purchase39.2000
  22. 22. Innovative approachUse innovative approach to be more successful and secured Thank you!

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