Key question
Which FX exposures across subsidiaries net out at group level — and how to hedge only the true residual risk with hedge accounting treatment?
Enter your company data
EUR (reporting) · Brazil / Eurozone / USA · hedge ratio 100%
Group net economic exposure (unhedged)
The group's net currency exposure is identified and stress-tested against extreme FX moves. Each currency pair's contribution to EBITDA risk is measured separately, then combined accounting for correlations between pairs. Under joint adverse movement of all currencies, the 5% worst-case EBITDA impact reaches EUR 12.9mn.
Max EBITDA loss · EUR/BRL
EUR 9.4mn
5% probability · 1-year horizon · BRL exposure only
Max EBITDA loss · EUR/USD
EUR 5.6mn
5% probability · 1-year horizon · USD exposure only
Max EBITDA loss · all currencies
EUR 12.9mn
5% probability · 1-year horizon · diversification benefit −2.0mn
Impact of the current hedging policy
Each subsidiary hedges 100% of its transaction exposures — at first glance this sounds prudent. But viewed at the group level, the subsidiary-level hedges destroy the natural netting between the BRL positions of Brazil and the USA, doubling group-level risk.
Max EBITDA loss · EUR/BRL
EUR 18.7mn
was 9.4mn unhedged — doubled by subsidiary hedges
Max EBITDA loss · EUR/USD
EUR 4.9mn
was 5.6mn unhedged — slightly improved
Max EBITDA loss · all currencies
EUR 19.6mn
was 12.9mn unhedged — 52% worse overall
Optimal strategy: group-level netting (hedge the net position)
Instead of each subsidiary closing its own risks independently, the group looks at the aggregate open position and hedges only what does not naturally offset across subsidiaries.
EaR · total
EUR 0mn
BRL and USD positions naturally offset
Hedge notional
−90%
from USD 300M + BRL 600M to USD 60M
Demo is based on historical data. In the full version — current data, your currency, your company's portfolio.