Proxy-hedging problems

Taiwanese insurers

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Taiwanese life insurers' portfolios typically comprise 30-35% of foreign assets and, of those, well over 80% are US assets. Given the thinness and illiquidity of the offshore non-deliverable forward (NDF) and local cross-currency swap (CCS) markets, it has been challenging for many of these companies to move away from proxy currency hedging towards straight hedging without pushing up prices on the target product. In short, proxy hedging - whereby a basket of correlated currencies is used as a pr

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