The position was fully hedged

问题如下：

HNW Worldwide Inc. (HNW) is a wealth management company located in Chicago that specializes in very-high- and ultra-high-net worth clients. Pierre Fournier, a currency specialist at the company, is reviewing the file of a long-time client, Alex Testa, an American. Testa is a former engineer in the plastics industry who has been very successful in identifying potential takeover candidates during the consolidation of the plastics and packaging industry that has been occurring since about 2001.

As US opportunities declined in the plastics industry, Testa began to consider foreign investments. In the fall of 2008, he acquired a position in a South African plastics processor. Although the foreign currency return on the investment was impressive, his domestic return was substantially negative because of the foreign currency change against the US dollar.

Testa’s association with HNW began in 2009 as he was about to undertake a position in a Spanish packaging company. Fournier used Testa’s description of his investment process to develop an investment policy statement (IPS) for him, which included the following objectives and constraints:

• Testa fully believed in his investment process, which was to be the primary focus in generating investment returns.
• Testa was not overly risk averse.
• Only the major currencies against the US dollar were likely to be used for the next several years.
• Currency exposure would usually not extend beyond a six-month period.
• Negative currency moves were to be rebalanced monthly if they exceeded 3% of the initial exposure.
• Currency options could be used selectively—only if a strong market view was held when rebalancing a hedged position that had already proved profitable.
• The anticipated positions would not have any associated income or liquidity requirements.
• The cost of any hedging strategies used should be minimized and not materially affect the otherwise unhedged asset return.

In regard to the anticipated currency movements related to the Spanish packaging company investment, Fournier told Testa that HNW was forecasting that the euro was likely to appreciate against the US dollar in the next six months.

In terms of the objectives and constraints that were incorporated into Testa’s IPS, the one that best explains the initial euro exposure of the Spanish investment in 2009 is the one related to his:

选项：

A.

risk aversion

B.

return objective

C.

liquidity constraint

解释：

Correct Answer: B

B is correct. The main goal of Testa’s investment program is the realization of returns based on his perceived superior ability to discover merger and acquisition targets. The position was fully hedged even though both he and his adviser believed that the euro was likely to appreciate over the investment horizon; there was no attempt to exploit that belief either with futures or options (although the use of options was restricted to strong market views at the time of rebalancing of an already winning position).

A is incorrect. Testa is not overly risk averse; his main focus is on the return generated from his investment process.

C is incorrect. Testa’s investment program did not impose any liquidity or income needs on the position.