Hedge Cost Comparison

by MCM Analyst 10/22/2015
The following excludes extension costs, fallout error, and hedge ratio error. Calculated with daily pair-offs or adds due to market movement (to capture the whipsaw effect) over a monthly period and daily option costs for the same period for a sample client's pipeline.

Client fallout ratios and fallout volatility have changed significantly since 2008; however, the benefits from using options is the same: the correct amount of option coverage for a given pipeline results in hedge costs that are dramatically lower especially in volatile markets.