Overview

When KRW weakness becomes the baseline rather than the exception, traditional 100% hedge ratios begin to misalign with portfolio objectives. We outline a framework that disaggregates hedge costs, opportunity costs, and basis risk — then recomposes the decision around portfolio purpose.

Why redesign now

A multi-year KRW depreciation cycle has reframed the hedge question from "how much" to "what purpose." Cost structures that were marginal at 1,200 become material at 1,500.

Disaggregating cost

We separate (1) forward-points spread, (2) margin and rebalancing friction, (3) opportunity cost of cash drag, and (4) basis risk against the underlying asset.

Reframing by purpose

Cash-equivalent positions, growth equity, and structured private positions each warrant different hedge profiles. We provide a decision matrix.

Operating cadence

Quarterly review of hedge ratio against currency volatility regime; semi-annual review of cost structure with counterparty.