Roflnadal

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