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Dynamic Global Currency Hedging
Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avis › Tidsskriftartikel › Forskning › peer review
Dokumenter
- Dynamic_Global_Currency_Hedging_JFE_2021_AM
Accepteret manuskript, 912 KB, PDF-dokument
DOI
- https://doi.org/10.1093/jjfinec/nbaa030
Forlagets udgivne version
This article proposes a model for discrete-time currency hedging based on continuous-time movements in portfolio and foreign exchange rate returns. The vector of optimal currency exposures is given by the negative realized regression coefficients from a one-period conditional expectation of the intraperiod quadratic covariation matrix for portfolio and exchange rate returns. Empirical results from an extensive hedging exercise for equity investments illustrate that currency exposures exhibit important time variation, leading to substantial volatility reductions when hedging, without sacrificing returns. A risk-averse investor is willing to pay several hundred annual basis points to switch from existing hedging methods to the proposed dynamic strategies.
| Originalsprog | Engelsk |
|---|---|
| Tidsskrift | Journal of Financial Econometrics |
| Vol/bind | 19 |
| Nummer | 1 |
| Sider (fra-til) | 97-127 |
| Antal sider | 31 |
| ISSN | 1479-8409 |
| DOI | |
| Status | Udgivet - 2021 |
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