ohai

Paraguay Wrote:
-------------------------------------------------------
> yodhava Wrote:
> --------------------------------------------------
> -----
> > They could have added one more bit of
> complexity
> > to the problem by adding
> >
> > - the UK bond returns and risk measures are in
> > "local currency".
> > - and they give you the correlation between the
> UK
> > asset returns with the exchange rate (0.3) and
> > return on the US/UK exchange rate (-1.5%)
> >
> > nice practice example, thx
>
>
> It would be the standard deviation of exchange
> rates, not the return correct?

Yeah Paraguay, they would also need to give you the standard deviation of exchange rate return over that period.
But you also need the exchange rate return so that you can calc the UK bonds return in US currency.

UK Bond Return (in usd) = UK Bond return (local) + s ( USD/UK return)

UK Bond Risk (in usd) = SQRT ( UK Bond local ^2 + s^2 + 2*UK-L*s*Corr(UK-L,s) )

Right?