An effective hedge for eurozone tail risk has to tick two boxes: it should be liquid enough so that large positions can be put on and taken off easily; and it should pay out when required. The foreign exchange market meets the first of those criteria. The difficulty – as many market participants are finding – is identifying a trade that meets the second.
“Whether we’re talking to corporates, pension funds, hedge funds or asset managers, this is a big focus. But the best hedge is not always the m