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Back to Best

“Best Execution” is becoming increasingly important for the FX market. Yet according to Achim Walde, Senior FX Risk Manager at Metzler Capital Markets, there is more to it than just asking three brokers for the best price. Read the interview to find out what "Best Execution" entails.

"Back to Best" (PDF, 255 kb)

(c) K&K Global Consulting Ltd.

FX Risk Management - Currency Overlay

Currency risks cannot be eliminated, but they can be managed

Investments and business transactions in foreign currencies involve a considerable foreign exchange risk. Their success is affected by exchange rate movements, which can have a substantial impact on overall results. In extreme cases, they can even turn profits into losses.

A disciplined and systematic currency management shields companies and investors from extreme losses by greatly reducing both volatility and drawdowns.

Metzler's experienced FX Risk Management team offers a currency overlay for institutional clients. An overlay strategy comprises the selective management of currency risk, irrespective of the underlying. All risks are monitored and documented by the overlay manager. In this way, currency risks can be managed efficiently, taking into account the client’s individual risk tolerance. In addition, clients achieve a clear division of risk responsibilities: investment decisions are kept separate from foreign exchange risk. Overlay strategies increase the flexibility of clients when market conditions or currency exposures change, for example, as a result of revised turnover expectations.

Our services range from a passive overlay to the active management of hedge ratios based on a multi-model architecture - always taking the individual risk profile into account.

Passive overlayActive overlay
  • Constant hedge ratio
  • Systematic calculation of the optimal hedge ratio, taking the individual risk profile into account
  • Optimization of hedging costs and cash flow management via the maturity structure of currency forwards
  • Dynamic management of the hedge ratio
  • Quantitative multi-model approach, no discretionary decisions
  • Models with different time horizons to reduce temporary volatility yet participate in higher-order price trends
  • Participation in positive currency movements
  • Reduction in hedging costs

Alongside a transparent daily reporting, comprising understandable performance measures and meaningful risk indicators, our FX Risk Management service includes the reporting of all reportable derivatives transactions under the European Market Infrastructure Regulation (EMIR) and a best execution process optimised by currency pairs to avoid unnecessary expense.

Companies and institutional investors are aware of the possible consequences of unhedged currency exposures. Metzler Bank is a reliable and independent partner with many years of expertise in FX trading. Our FX Risk Management offers you an innovative package comprising risk analysis and a custom-tailored hedging strategy for your currency exposures.

Contact:

Özgür Atasever
Head of FX Risk Management
OAtasever@metzler.com
(+49 - 69) 21 04 - 2 81
Dominik Müller
DMueller@metzler.com
(+49 - 69) 21 04 - 2 74
Achim Walde
AWalde@metzler.com
(+49 - 69) 21 04 - 2 75
Simon Wesch
SWesch@metzler.com
(+49 - 69) 21 04 - 3 50
Harwig Wild
HWild@metzler.com
(+49 - 69) 21 04 - 2 79

FX Risk Management
E-mail fxoverlay@metzler.com
Fax (+49 - 69) 21 04 - 6 79