-
2X
increase in client analysis
-
50%
lower costs vs direct hires
-
10+
years of support
CLIENT CHALLENGES
- A leading European bank wanted to offer customised hedging solutions to its client. The bank wanted to first calculate the risk to the client from its commodity exposure before offering a hedging solution to minimise the risk
- Acuity Knowledge Partners deployed a team of subject matter experts and technical specialists to create models to calculate risks and derivative pricing and devise optimal hedging strategies based on the client’s requirements
OUR APPROACH
- Acuity collected financial data of the client, including EBITDA, revenue, and commodity and currency exposures, from various sources
- Value-at-risk was calculated using Monte Carlo simulation based on the geometric Brownian motion model. Risk decomposition and optimisation of various strategies were also calculated
- Advanced Excel/Python tools were built to compare different strategies for hedging the exposure, and efficient frontiers were obtained to select optimal strategies
- The team customised a hedging solution for foreign exchange (FX), commodities and interest rate, focusing on:
- Quantity to hedge – whether to hedge all or part of the exposure
- Methods to hedge – direct and indirect hedging
- Best instruments – options, swaps, forwards
- Quantitative analysis was combined with macroeconomic analysis to develop a holistic hedging strategy for the client
- The hedging strategy was backtested to help the client make an informed decision
IMPACT DELIVERED
- The bank managed to increase significantly the numbers of client analysis with the help of the Acuity team. Moreover, the bank’s Sales team could focus more on client-facing tasks and increasing trade turnover
- Acuity helped customise the hedging solution for FX, commodities and interest rate
- The client could access highly qualified and experienced resources at a fraction of the onshore cost
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