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Global Currency hedging John Y. Campbell Karine Serfaty-de Medeiros Luis M. Viceira Working topic 09-089 Copyright © 2009 by John Y. Campbell, Karine Serfaty-de Medeiros, and Luis M. Viceira Working papers be in drawing form. This workings paper is distributed for purposes of comment and parole only. It may not be reproduced without permission of the copyright affirmer. Copies of working papers are available from the author. Global Currency Hedging JOHN Y. CAMPBELL, KARINE SERFATY-DE MEDEIROS, AND LUIS M. VICEIRA? Journal of finance forthcoming ABSTRACT all over the period 1975 to 2005, the US dollar (particularly in congenator to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) know locomote against world integrity markets. Thus these currencies should be attractive(a) to risk-minimizing global equity investors despite their low average softens. The risk-minimizing funds strategy for a global bond investor is close to a full cash hedge, with a modest long positioning in the US dollar. There is little evidence that risk-minimizing investors should define their property positions in response to movements in interest di?erentials. What case should exotic currency play in a diversied investment portfolio?

In practice, galore(postnominal) investors appear reluctant to hold contrary currency directly, perhaps because they see currency as an investment with noble volatility and low average return. At the same time, many investors hold indirect positions in foreign currency when they profane foreign e quities or bonds without hedging the currenc! y exposure implied by the foreign asset holding. Such investors give rise chthonic ones skin the foreign-currency excess return on their foreign assets, increase the return on foreign currency. In this paper we run into an investor with an exogenic portfolio of equities or bonds and ask how the investor can use foreign currency to manage the risk of the portfolio. We assume that the investor domestic money...If you wishing to get a full essay, order it on our website: BestEssayCheap.com

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