So many hedge. So confusing... currency, equity, price, where

yuoska

I just realised currency hedge we do not divide by the price. Just take portfolio value/lot size. For equity hedge we need to consider the price. Worse still, there are some hedge where we need to multiply by 1+rf. It so confusing

Chuckrox

Just remember the 1 + rf is when you are monetizing an equity position. You use the 1 + rf to 'lock in' the cash return during that period.

aidebaobao

(1+rf) is to convert a risky portfolio to cash.

(1+rf) is missing when eliminating the systematic risk from the portfolio but that does not mean what is left is riskless as there could still be other risks still there.