Darien

kylee Wrote:
-------------------------------------------------------
> Hi,
>
> For the general hedging,
>
> If the anticipated appreciation (from IPP
> calculation) < Mgt's forecast : hedge (to get the
> extra profit).
> If the anticipated appreciation (from IPP
> calculation) > Mgt's forecast : no hedge.
>
> If the anticipated depreciation (from IPP
> calculation) > Mgt's forecast : hedge (otherwise
> loss will be more than expected).
> If the anticipated depreciation (from IPP
> calculation) < Mgt's forecast : no hedge.
>
>
> But my question is why we need to hedge currency
> risk for bond but not for equity?
> The reason for not hedging equity are:
> (1) currency risk & mkt risk arte not additive
> (2) currency risk can be eliminated by
> derivative.
> (3) currency risk is insignificant & will revert
> to fundamental in long term.
>
> But I can't find proper reason for the hedging of
> bond return.
> The answer just said " hedge as significant
> difference between hedged & unhedged bond return."
> I think this is the result of not hedging and want
> to know the reasons.
>
> Please suggest reasons for the difference in
> hedged & unhedged bond returns
>
>
> Many thanks,
>
> Lee


If IRP < manager forecasted appreciation, then why should we hedge??

NO EXCUSES

Iginla2011

Hedge it only if r(dc)-r(fc) is higher.



Edited 1 time(s). Last edit at Friday, May 6, 2011 at 10:03AM by deriv108.

lcai

ok done. Don't Hedge when you expect to beat the market.

Valores

ok great now please explain it to me