Colum

This has been driving me mad. bpdulog, can you explain the second part of your statement. I get the first part where if you think foreign will appreciate more than IRP suggests, you don't hedge.

But for second statement, if you think IRP depreciates more than what you expect, than you hedge? Is that right? I thought you wouldn't hedge since hedging would mean you get IRP?


Sorry if I caused any confusion. Just want to know if this statement applies to both appreciation and depreciation case:

ONLY HEDGE IF YOU THINK YOU CAN'T BEAT THE MARKET?

(so if IRP > your expectations, hedge).

Is this correct?

NakedPuts2011

just calculate both the hedged and unhedged return, and pick which one is bigger

canadiananalyst

1. You expect foreign to appreciate more than market expects. Hedge or no hedge?
2. You expect foreign to depreciate less than market expects. Hedge or no hedge?

I thought both would be to not hedge. Is this wrong?



Edited 2 time(s). Last edit at Thursday, May 5, 2011 at 09:18AM by mp2438.

oneboy

bpdulog , did you mean , expectation of less DEPRECIATION than the market expects?

Because if both you and the market expect APPRECIATION , why would you hedge at all , in the context of a long position in foreign stocks/bonds?

Please help to clarify when you would hedge an expected appreciation of the local currency versus the domestic