Corporates eye FX options as hedging tool
Punitive CVA charges on FX forwards lead to FX options interest
Corporate treasurers are becoming more aware of buying out-of-the-money foreign exchange options in order to hedge their FX exposure as cheaper premiums. Stinging bank credit charges and harsh interest rate differentials have made the contracts more efficient to trade than FX forwards.
While banks feel low volatility has helped to make option premiums cheaper for corporates, their increased use of credit valuation adjustment (CVA) charges to counterparties since the financial crisis has made
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