Perspectives 2023: How Financial Institutions Are Continuing to Hedge

At Numerix, we have found that the ways our institutional clients gravitate toward one or more types of hedging solutions depends on several variables, such as their geographical location, investment objectives, and portfolio structures.

Hedging is obviously a mainstay activity for most, if not all, financial firms across the world. What we wanted to do was uncover how our global clients are pursuing their hedging activities this year. For this objective, in September 2023 we distributed an internal survey to a wide group of Numerix client-facing professionals (e.g., financial engineers, product specialists, sales groups, etc.) to collect information regarding our clients’ current hedging strategies and what drives those strategies.

This paper shares the survey’s insightful results regarding the following factors:

• The priority risk factors our clients are hedging against
• Year-over-year changes clients may have made to their hedging activities
• The most common hedging challenges they face
• How they measure hedging effectiveness