If a PE firm is exploring an investment in a high quality project but in a country with substantial currency volatility, how do they typically hedge such risk? What kind instruments do they use? Can they just purchase an option from local financial institutions to purchase USD at a fixed rate over the next few years? Where can I read up more on this?
There's a general understanding that the country's currency will lose value over time.
| +82 | Sr Asso / VP Unemployment Check-in | 50 | 55m | |
| +30 | What did you do after signing? | 10 | 8h | |
| +26 | VP Level - when to follow up after final round | 10 | 3d | |
| +24 | Resume Gap after 2.5 Years in PE | 5 | 13h | |
| +21 | Public company LBO | 7 | 23h | |
| +20 | Vista Lateral Associate | 12 | 2d | |
| +18 | VP HF Lateral to PE | 1 | 1d | |
| +18 | PE Recruiting From IB- Play It Safe Or Reach For Best Fund Possible? | 6 | 4h | |
| +16 | IB/PE Lifers, Was It Worth It? | 5 | 2d | |
| +16 | Banner Ridge | 27 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
goes both ways - hedging can be very expensive. i had a prior internship in EM PE and for some deals we'd hedge and some we'd just go in naked - currency movements will then become a point of analysis in your periodic investment reviews
Currency hedging for certain EM currencies can be very expensive, one way to deal with it is to assess the full impact of fluctuations on the project and its returns and then price the offer accordingly (e.g. aim for a USD IRR assuming a certain annual depreciation)
Est iure quia est cumque qui ducimus. Deserunt quis voluptas accusantium optio vel repellendus. Necessitatibus ad aut deserunt. Harum quos possimus eos totam. Hic et inventore consequatur. Ut inventore dolor pariatur dolorem quibusdam similique dolor omnis.
Est earum optio quo nemo. Aut ipsum sint ratione alias ex nesciunt in.
Sapiente voluptate corporis provident dignissimos quis qui voluptatibus. Atque et tenetur veniam. Nisi quo omnis voluptatibus. Saepe delectus tempore aut beatae et tempore voluptate.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...