Sanjay Madgavkar Director, Business Development - FX ecommerce, Citigroup
Sanjay Madgavkar Director, Business Development - FX ecommerce, Citigroup

Benchmarking - Helping to reduce market footprints

Benchmarking - Helping to reduce market footprints

First Published: e-Forex Magazine 16 / Features / October, 2004

Markets, as we know, experience natural price and volume fluctuations as a reflection of the dynamic forces of demand and supply. Managers responsible for market risk exposure, therefore, need to evaluate both the risk consequences and their unit's trading performance in these conditions. Probably the most consistent and reliable way to achieve this is to measure risk and performance against appropriate benchmarks. In probably their most important function, benchmarks act as yardsticks to assess performance and risk exposure against a unit's goals. The need for benchmarks in the currency markets is particularly widespread because currency exposure (whether welcome or not), accompanies most cross border transactions* and needs to be monitored and measured carefully. Although benchmarks are primarily used as yardsticks, they have developed increasing importance as rates at which transactions are actually executed. This is because transacting at any rate lower than the measured benchmark rate usually results...continued

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