I would like to get a trades view on hedging a FX Forward with a FX Future by just moving the (1) FX_Spot rate and ignore the other risk factors (2) ccy1 DV01 risk, (3) ccy2 DV01 risk, (4) basis swap risk between ccy1 and ccy2. What would the best way performing that? Does someone has an example how to perform it? Thanks.

  • $\begingroup$ The question is not clear. You want to hedge a fx forward using an fx future ? Do they expire on the same dates? What is the purpose of the other information in the question? $\endgroup$ – dm63 Aug 12 '17 at 11:36
  • $\begingroup$ I want to hedge futures with forwards with same expiry. Normally I would expect using delta for both. Or does a trader performs if differently to just look at the fx Spot $\endgroup$ – MCM Aug 12 '17 at 11:38

Fx futures and fx forwards with the same expiration are an excellent hedge for each other. They basically trade on top of each other.

  • $\begingroup$ Thanks a lot. Would I use then Delta to Hedge against each other or something else? Do you have a concrete example how that would work? That would be really nice. $\endgroup$ – MCM Aug 13 '17 at 14:36
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    $\begingroup$ These are linear instruments so the delta is 1. If you buy one contract on the EUR/USD for September expiration at the CME you would need to sell forward Eur125,000 versus USD in the forward fx market to create an almost perfect hedge. $\endgroup$ – dm63 Aug 13 '17 at 14:51
  • $\begingroup$ thanks and what is if I would habe a fx swap or cross currency swap? $\endgroup$ – MCM Aug 13 '17 at 15:11

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