Rolling hedging is part of a ‘family’ of hedging programs in which the foreign-currency exposure for the current budget —divided into months or quarters— is forecasted and hedged partly (or entirely) during the previous budget period. The process is continuously updated, as the following year’s exposure is planned and hedged during the current year.
The hedge rate for a given period is the average of all the forward rates used to hedge the exposure of that particular period. While keeping the exposure under management constant, rolling hedging programs require continuous forecasts, as no budget is hedged in isolation—rather, each budget is hedged in connection to the previous one.
While rolling hedging programs are relatively straightforward to implement and manage, Currency Management Automation solutions allow firms to run them in a fully automated manner, minimising operational risk and freeing up time for treasury teams to concentrate on more value-adding tasks.
Also, Currency Management Automation makes it possible to combine rolling hedging programs with more dynamic programs based on hedging firm commitments instead of forecasts.