IAmNeil

onelasttime Wrote:
-------------------------------------------------------
> Return on foreign asset in USD = (1+Return in
> LC)(1+%change in foreign Currency) - 1
>
> Where did you get this from?
>
> I have always seen R (unhedged) = Return on asset
> + s (1+Return on asset) Reading 40
>
> You can also add:
>
> R (Hedged) = Return on asset - hedge ratio x
> return on futures
>
> or
>
> R (Hedged) = Return on asset + return on currency
> x ( 1 - hedge ratio)


R (Hedged) = Return on asset - hedge ratio x
return on futures

or

R (Hedged) = Return on asset + return on currency x ( 1 - hedge ratio)

I can understand the first one, how to get the second one? Are the two "Return on asset" the same?