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Query on SS 10, CFAI curriculum Page 137 (Fixed Income II)
*Potential Stupid Question Alert*
Hi,
So I have the following question, if anybody is willing to offer an explanation:
Reference: Reading 30 of CFAI Curriculum, Page 137 (Study Session 10, Fixed Income II)
Example 19: David Marlet is the portfolio manager of a french fund that has substantial holdings in UK pound denominated british govt funds. Simon Jones is the PM of a british fund that has a large holding in euro denominated french govt bonds.
ST interest rates = 3.2% in France and 4.7% in UK = fwd discount of 1.5% on pound.
Marlet and Jones believe that UK Pound will fall less than 1.5% in coming months.
Q1: Should Marlet use a fwd contract to hedge the fund’s exposure to british pound?
Q2: Should Jones use fwd contract to hedge the fund’s exposure to euro.
————————-thats the question part———–
My Confusion:
Q1: If pound is expected to fall, it implies, marlet is currently getting more euros when he converts his UK denominated returns. So wouldn’t he like to maintain this favorable exchange rate and hedge the portfolio, so that falling Pound (rising euro= less euros on conversion) doesn’t affect his returns going forward?? Pls help.
Q2: vice versa logic here, i guess once i get Q1, i should get Q2 too.
Thanks! |
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发表于 2013-4-3 18:16
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