Systematic is better than discretionary -
Kshitij Consultancy Services
Systematic is better than discretionary

It is human to doubt a system and try to out-think it. However, we have clear data to show that is better to follow a system that is already proven than to hedge on a discretionary basis, as seen below.

Although the KSHITIJ Hedging Method was devised when we began hedging for clients, there was a preference from both sides (clients’ and ours) for discretionary intervention, or hedging based on mutual discussion.

The results of the NEER for both the KHM (model) and Actual Discretionary Hedging since 2020 are given below.

Export Realisation and Import Payment

As can be seen,
the Export Realisation under KHM (77.8549) is higher than under Discretionary (77.6523) and the Import Payment under KHM (77.4715) is lower than under Discretionary (77.5791). Resultantly, the EXIM Spread under KHM (38 paise/$) is 31 paise more than under Discretionary (7 paise/$). This 31 paise is 4X times more than the 7p/$ achieved under the Discretionary.

The finding is not new, because it is known that well thought out and reliably proven systematic hedging is better than discretionary hedging. The data demonstrates the advantages of Systematic Hedging, and should encourage clients to confidently adopt the KSHITIJ Hedging Method.

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KHM measures both actual and opportunity Profit and Loss

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