oneboy

THINK


IRP=HEDGED
IRP=HEDGED
IRP=HEDGED
IRP=HEDGED

Write out the interest rates of the two countrys. One will be less than the other and the one expected to appreciate to validate IRP. This difference is the rate you can lock in with hedging; its the IRP rate. IRP= HEdged return.

The Portfolio Manager or his team will also come up with an appreciation/depreciation expectation. Write this down next to the IRP/Hedged/Difference between interest rates and compare them. Whichever one is higher you go with. If the IRP/Hedged/Difference between countrys interest rates difference is higher, you go with that one (the hedged return). If your PM expectation is higher, you go with that one (if you memorize ips=hedged, this naturally leaves the PM guess to be the unhedged version).

This is a helpful trick I have been using. Gluck!