Just as corporations have to deal with “forecasting error” in terms of the deviation of forecast exchange rates relative to the actual future rate, so investors have to deal with “tracking error” within their portfolios, which is the return of the portfolio relative to the investment benchm[...]
Archive for the ‘Management’ Category
July 2nd, 2009 - 8:34 am § in Management
HEDGING — MANAGEMENT RELUCTANCE AND INTERNAL METHODS
Having looked in detail at the issue of managing currency risk, we should now be looking at the specifics of how to hedge that risk. Before we do that, we first have to examine the issue of management reluctance to hedge a risk many see as merely an operational hazard of international investment. So[...]