Risk-Based Currency Management

Risk & Reward, 2017, 1st issue, pp. 20-24

7 Pages Posted: 7 Apr 2017

See all articles by Martin Kolrep

Martin Kolrep

Invesco

Harald Lohre

Invesco; Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Date Written: March 2, 2017

Abstract

Dealing with a portfolio’s currency risk is no clear-cut matter. Using a minimum variance hedging strategy, we explore a middle road between full hedging of all currency risks and no hedging at all. Past performance analysis suggests that a minimum variance hedge is often superior to either extreme. Given the quite stable correlation between exchange rates and asset classes, the minimum variance hedge can reduce portfolio risk substantially in many cases.

Keywords: FX, Hedging, Minimum-Variance

JEL Classification: F31, G11

Suggested Citation

Kolrep, Martin and Lohre, Harald, Risk-Based Currency Management (March 2, 2017). Risk & Reward, 2017, 1st issue, pp. 20-24. Available at SSRN: https://ssrn.com/abstract=2947872

Martin Kolrep

Invesco ( email )

An der Welle 5
Frankfurt, 60322
Germany

Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Bailrigg
Lancaster LA1 4YX
United Kingdom

HOME PAGE: http://www.lancaster.ac.uk/lums/research/research-centres/financial-econometrics/

Register to save articles to
your library

Register

Paper statistics

Downloads
197
rank
151,300
Abstract Views
675
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information