Exotic forex option losses in 2008 still haunt market
SMEs have returned to option strategies since the financial crisis but in a more nuanced way
In 2008, as financial markets buckled in the wake of the Lehman Brothers bankruptcy, Chinese steel-maker Citic Pacific lost an astonishing $2.4 billion on derivatives it had purchased to hedge the Australian dollar. The company had used target redemption forwards to take a long position of A$9.44 billion ($7 billion) to protect its investment in a mining project in Western Australia, but the
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