Cross Hedge vs. Proxy Hedge

[RoccoLee]

Could someone explain what is the difference between cross hedge and proxy hedge, please?

 

[onlysimon]

you are CHF performance currency, worried the NZD will devalue.
cross hedge - NZD/EUR forward
proxy hedge - CHF/AUD forward
yes the same sort of thing, but the proxy is finding something similar to what you are hedging against. the cross is something similar to what you are hedging too.

 

[RoccoLee]

onlysimon wrote:
you are CHF performance currency, worried the NZD will devalue.
cross hedge - NZD/EUR forward
proxy hedge - CHF/AUD forward
yes the same sort of thing, but the proxy is finding something similar to what you are hedging against. the cross is something similar to what you are hedging too.

Thanks a lot!