Portfolio of Financial Options as Currency Hedging Strategy in Colombia

摘要

The purpose of this document is to mitigate the exchange risk for investors who buy US dollars from Colombian pesos. The risk of change to which dollar-buying investors are exposed is determined by the participation in cash flows from the change in foreign currencies, but currency hedging strategies with limits reduced this risk. Coverage is made with purchase options and with a portfolio of options to determine the best coverage strategy. The Geometric Brownian Motion is applied to the modeling of the price of the currency. Monte Carlo simulation results are obtained for three months of projection where it is found that the two hedging strategies mitigate exchange risk, but the best results are the options portfolio.