Protecting her deferred compensation from market volatility.
Linda’s deferred compensation is heavily weighted towards company stock, making her vulnerable to market fluctuations and the specific performance of her firm post-buyout. She needs to diversify her portfolio without triggering immediate and substantial tax liabilities associated with liquidating the stock. The risk of a market downturn significantly eroding her retirement savings keeps her up at night.
Using the Forward Premium Calculator, we analyzed various hedging strategies, specifically evaluating the cost and potential returns of using forward contracts to protect the value of her stock holdings during the transition period. By understanding the forward premium, Linda could confidently implement a hedging strategy. By locking in a future selling price, she protected $1.5 million in deferred compensation from a potential 15% market correction during the 12-month transition.
The Forward Premium Calculator allowed us to analyze current spot prices and forward rates on various asset classes to determine the most cost-effective hedging strategies. We also used the Interest Rate Parity Calculator to understand the relationship between interest rates and exchange rates for potential international investments.
$225,000 in downside protection, ensuring Linda's financial security during the partnership buyout.
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