# Hedge Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/hedge-ratio/
Last updated: 2026-10-25

> The hedge ratio calculator works out what share of a position is protected by a hedge – the value of the hedge divided by the total exposure – and the unhedged amount.

## Inputs

- Value of total exposure
- Value of hedge position

## Results

- Hedge ratio
- Unhedged exposure
- As a decimal

## Formula

```
Hedge ratio = value of hedge position ÷ value of total exposure
Unhedged exposure = exposure − hedge
```

## Explanation

A hedge ratio of 1 (100%) means the position is fully hedged; 0 means unhedged. Exporters, for example, often hedge 50–80% of expected foreign currency income to reduce risk while keeping some upside.

### How to use the Hedge Ratio Calculator

- **Value of total exposure**
- **Value of hedge position**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the value of your total exposure and the value of the hedge position.

### Tips

- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.

### Common mistakes to avoid

- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).

### Inputs explained

FieldWhat to enterValue of total exposureAmount in your currencyValue of hedge positionAmount in your currency

### What each result means

- **Hedge ratio** = [Value of hedge position]÷[Value of total exposure]×100
- **Unhedged exposure** = [Value of total exposure] - [Value of hedge position]
- **As a decimal** = [Value of hedge position]÷[Value of total exposure]

### Example values

How the main result changes when **Value of total exposure** changes and everything else stays at the example values above:

Value of total exposureHedge ratio (%)500,00075750,000501,000,00037.51,250,000301,500,000252,000,00018.75

## Worked example

Inputs — Value of total exposure: $1,000,000; Value of hedge position: $375,000.

Results — **Hedge ratio = 37.5 %**; Unhedged exposure = $625,000.00; As a decimal = 0.375.

## FAQ

**What does a hedge ratio of 0.5 mean?**
Half of the exposure is protected by the hedge.

**Is a 100% hedge always best?**
No – it removes upside too and may cost more than the risk is worth.

**What is the optimal hedge ratio?**
The ratio that minimises variance, based on correlation and volatilities.

**What formula does the Hedge Ratio Calculator use?**
Hedge ratio = value of hedge position ÷ value of total exposure.