In short
Historical market data shows what happened: the volatility of recent weeks, the correlations of last quarter. In treasury, though, next week is what counts. Forward-looking market data such as implied volatilities shows what the market prices today for the future. Just as important is simulating risk across the whole portfolio, forwards and option structures included, and seeing how each hedge decision changes the overall picture.
The post
Rear-view mirror or windscreen?
Thirty years on an FX desk teach you one thing: most risk systems show how high the risk was yesterday. Not how high it will be tomorrow.
Historical market data tells me what happened. The volatility of the last few weeks, the correlations of the last quarter. Useful for looking back, but in treasury next week matters, not last week.
Forward-looking market data turns the perspective around: not “how volatile was the market?” but “what is the market pricing for the future today?”. Implied volatilities show how risk is likely to develop before it materialises.
The second point matters at least as much: none of this helps if I can only calculate it for a single contract. I need the simulation across the entire portfolio, vanilla forwards, option structures, every combination, and how each individual hedge decision affects the overall picture.
That is the difference GLORIAnalytics makes: forward-looking instead of backward-looking, portfolio-wide instead of fragmented by product.
Are you still looking in the rear-view mirror, or already through the windscreen?
What “forward-looking” means in practice
A historical risk measure works with what happened in a past window. After quiet months it shows low risk, precisely when something may already be building up in the market. Take an election date or a central-bank meeting: the option market often prices the expected turbulence weeks in advance, while the historical window only sees it afterwards.
Implied volatilities are not a forecast of direction. They show the range of movement the market expects, and pays for, over a given period today. That range is exactly what treasury needs to size risk and hedging needs.
The second half of the post matters just as much. An option pricer for a single trade does not tell you what a hedge means for the company. For that the whole portfolio has to be simulated, all open positions, forwards and option structures, with the correlations between the currencies. Only then does it become clear whether a new hedge lowers the overall risk or merely moves it somewhere else.
First published on August 31, 2026 on LinkedIn. Original language: German. Join the discussion on LinkedIn → Website version: adapted from the original with AI assistance · reviewed by S. Hamberger
GLORIARMS
GLORIARMS develops GLORIAnalytics, independent FX risk analytics for corporate treasuries and the banks that serve them.
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