Currency Hedging Analysis for the UK Space Agency

The Government Actuary’s Department supported the UK Space Agency with an analysis of currency exchange data to assist the agency in safeguarding public funds while managing its euro payments to the European Space Agency.

The work provided UKSA with insights into financial risk, helping the agency protect public resources as it pursues its space-related objectives.

Hedging strategies

UKSA holds investments and makes ongoing payments in euros to the European Space Agency. At the same time, the agency receives its funding in pounds sterling from its sponsor department, the Department for Science, Innovation and Technology.

The analysis used historical currency exchange rate information to demonstrate the risks associated with making payments in a different currency. It examined how various currency hedging strategies, including securing exchange rates ahead of time, could be used to manage those risks.

Support for policy decisions

The government routinely handles transactions in foreign currencies and the findings from this analysis will help inform policy decisions on how UKSA carries out its payments to the European Space Agency.

Investment Consultant Timea Varga said: “This analysis was a great example of applying actuarial techniques to help understanding of financial risks. My background is in investment management; I was proud to be able to apply that experience to help inform policy and drive value for the public sector.”