Correlation for hedging and speculation

Background: The rise in demand for correlation products has been driven by a number of factors, notably:

1. A desire from end-users for products with which they are able to more closely express their view

2. Increased sophistication amongst market-makers and hence a greater willingness to take correlation risk

3. The desire to use options but at the same time reduce option premium.

Hedger problem: A US corporation has traditionally used forwards to hedge foreign currency revenues in euro, yen

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