PT  - JOURNAL ARTICLE
AU  - Frank J. Fabozzi
AU  - Suprita Vohra
TI  - Applications of FX Derivatives in Active Currency Risk Management
AID  - 10.3905/jod.2022.1.157
DP  - 2022 Mar 21
TA  - The Journal of Derivatives
PG  - jod.2022.1.157
4099  - https://pm-research.com/content/early/2022/03/21/jod.2022.1.157.short
4100  - https://pm-research.com/content/early/2022/03/21/jod.2022.1.157.full
AB  - Risk managers exhibit heterogeneous behavior as well as shortfall aversion, money illusion, and regret risk when managing portfolio risks. Foreign exchange options provide a flexible risk/return profile that is more likely to achieve such specific investment as well as behavioral objectives. We showcase five practical applications for international currency managers in selecting the appropriate hedging and active strategies for portfolio risk management. These solutions address a wide range of behavioral needs such as regret risk, shortfall aversion, positive skewness, and the increasing need for non-monetary satisfaction in the form of well-being utility.