EUR/USD
--
-- (--)
O: --
H: --
L: --
λ adaptativa: --
Reg --
·
Sig --
·
Fwd63 --
·
P85 --
·
P15 --
·
HAR --
Stress
Normal
Complacent
What is Cash-Flow-at-Risk and why does it matter?
When you have receivables or payables in foreign currency, you don't know exactly at what exchange rate they'll settle. CFaR answers a very specific question: how much of my exposure should I hedge with a forward so that, even in the worst market scenario at 95% confidence, my cash flow doesn't deviate more than X% from my accounting rate?
The model calculates h* — the optimal hedge ratio — using the pair's actual volatility (HAR model on historical data), the theoretical forward rate from real interbank rates (SOFR, ESTR, SONIA, TIIE), and a fat-tail market adjustment (Cornish-Fisher). It's not a random simulation: it's a closed-form formula, reproducible and auditable.
How is h* different from hedging 100%?
Hedging 100% eliminates risk but also eliminates any upside if the rate moves in your favor. h* is the minimum hedge needed to keep your maximum loss below your tolerance threshold. Above h*, you're paying premium for protection that the model says you don't statistically need.
What if the market moves beyond the worst case?
The model works with a 95% confidence interval. There's a 5% probability of more adverse scenarios — so-called tail events. For those cases, the Cornish-Fisher adjustment widens the bands compared to a normal distribution, precisely because FX markets have fatter tails than the Gaussian distribution predicts.
How often should I recalculate my h*?
The model updates with T-1 closing data. During high volatility periods (active Stress regime), review weekly. In Normal or Complacent regime, a monthly review is sufficient for quarterly budget adjustments.
Optimal Hedge Calculator
1 Your position
Closing or reference rate
CFO's budget rate
Tolerance threshold
USD
Model Detail