首页 | 学习中心 | 注册 登录
返回列表 发帖
BC_MBA_student

UID
223366 
帖子
475 
主题
101 
注册时间
2011-7-11 
最后登录
2016-4-18 
1# 跳转到 » 倒序看帖
打印
tT
发表于 2011-7-13 13:51 | 只看该作者

Currency sensitivity question - I'm lost

question, suddenly, currency, exchange, investor
Question from Schweser sample exams, told from point of view of a UK investor

Sensitivity of Slapshot (the Canadian stock) to changes in the Pound/Canadian $ exchange rate = 1.4.

Suppose the C$ suddenly depreciates by 10% against the Pound. What is most likely to happen to the C$ value of Slapshot in response to this sudden exchange rate change?

A) local currency value will fall 10%

B) local currency value will fall 4%

C) local currency would be unchanged

The answer is B

I'm totally lost on this material

Here's the explanation: The sensitivity is a function of the CAD reaction, specifically the sensitivity of the currency return is equal to y(CAD) + 1. Since y = 1.4, y(CAD) must be .4



Edited 1 time(s). Last edit at Wednesday, May 26, 2010 at 11:22AM by CFA.Rhythm.
收藏 分享

tarunajwani

Rank: 2

UID
223408 
帖子
227 
主题
26 
注册时间
2011-7-11 
最后登录
2014-8-5 
2#
发表于 2011-7-13 13:51 | 只看该作者
Currency exposure is in the ICAPM reading.

Specifiacally:

domestic currency exposure of an asset = foreign currency exposure +1

since the domestic currency exposure is 1.4 (point of view of UK investor) and we are looking for the foreign currency exposure (exposure of C$) then:

1.4 = Exposure C$ + 1 or rather the Exposure C$ = .4

TOP

giorgio10

Rank: 2

UID
223410 
帖子
344 
主题
15 
注册时间
2011-7-11 
最后登录
2016-4-19 
3#
发表于 2011-7-13 13:51 | 只看该作者
First, thanks for responding:

ok. Here's where I am confused.

We have a UK investor.

We have a Canadian stock.

We have the formula: domestic currency exposure of an asset = foreign currency exposure +1

---------

My questions:

1) I knows this sounds really lame, but who/what is the domestic exposure?

2) Who/what is the the foreign currency exposure

3) Who/what is the "local" currency exposure?

TOP

profil

Rank: 2

UID
223393 
帖子
262 
主题
7 
注册时间
2011-7-11 
最后登录
2014-7-8 
4#
发表于 2011-7-13 13:51 | 只看该作者
Alright, I understand. Sorry for the drama.

Basically:

domestic currency exposure of an asset = foreign currency exposure +1

1.4 = local exposure + 1

local exposure = .4

there you have it

TOP

返回列表