Strategic currency hedging

A Dales () and R Meese
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A Dales: Barclays Global Investors, Murray House

Journal of Asset Management, 2001, vol. 2, issue 1, No 2, 9-21

Abstract: Abstract This paper examines the rationale for strategic hedging policy, whereby some fixed proportion of the currency exposure associated with international assets is hedged. We begin with a review of both the theoretical and empirical literature on hedging policy. This literature provides a strong case for hedging some portion of the currency exposure associated with international investing. Differences in opinion remain, however, as to the appropriate methodology to use when constructing hedge ratios in practice. We advocate the use of portfolio optimisation methods and provide examples, along with caveats and guidelines, for the calculation of hedge ratios from a number of different currency perspectives.

Keywords: currency hedging; currency risk; hedge ratio; portfolio optimisation (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (5)

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DOI: 10.1057/palgrave.jam.2240031

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