Currency Hedged Return Calculations

8 Pages Posted: 12 Feb 2011

Date Written: February 10, 2011

Abstract

We see a contrast between the importance of the currency risk factor in modern investment management and its treatment in portfolio analytics like performance attribution and risk budgeting. Part of this can be explained by conceptual complexities: currencies are not just another asset class, but a risk exposure embedded in any assets and therefore affecting the overall portfolio in non-trivial ways. This research note addresses one particular aspect of currency risk analytics, namely the calculation of hedged asset currency returns. Such calculations are used in “paper portfolios” like benchmarks and generally ex ante performance and risk analytics.

Keywords: Currency, Risk, Portfolio, Return, Calculation

JEL Classification: C63

Suggested Citation

Steiner, Andreas, Currency Hedged Return Calculations (February 10, 2011). Available at SSRN: https://ssrn.com/abstract=1759204 or http://dx.doi.org/10.2139/ssrn.1759204

Andreas Steiner (Contact Author)

Andreas Steiner Consulting GmbH ( email )

Walderstrasse 43c
Hinwil, 8340
Switzerland

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