Dias has asked whether it would be appropriate for him to hedge his foreign currency exposure. Campos raises the issue with Traldi and Peixaria. Traldi responds, “In the short run, if the correlation between foreign asset returns and foreign currency returns is negative, then there may be a need to hedge all foreign currency exposure. Alternatively, one could implement a currency overlay program in which the currency exposure is fully hedged and currency alpha is generated separately. This currency overlay strategy will only be successful in adding value to the portfolio if the currency alpha has a high correlation with Brazilian equities and corporate bonds.”
In her response regarding hedging foreign currency exposure in Dias’s portfolio, Traldi is most likely:
- incorrect about the correlations, but correct about the currency overlay program.
- incorrect about the correlations and the currency overlay program.
- correct about the correlations and the currency overlay program.
答案：
B is correct. Traldi is incorrect about the correlations and the currency overlay program. In the short run, if the correlation between foreign currency asset returns and foreign currency returns is negative, then there may be no need to hedge all foreign currency exposure because some currency exposure is desirable from a portfolio diversification perspective. Regarding the currency overlay program, it will add value to the portfolio only if the currency alpha has a low correlation with other asset classes in the portfolio (i.e., Brazilian equities and corporate bonds).
请老师解释下为啥correlation这里不对，外币资产return和外币升值正相关，为啥就不用fully hedge，答案说为了diversification，不理解~
