The search for a balanced hedge ratio policy

B Lindenhovius () and G de Vrij
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B Lindenhovius: Philips Pension Fund

Journal of Asset Management, 2001, vol. 2, issue 1, No 4, 35-46

Abstract: Abstract This practical study focuses on different aspects of determining a currency policy for a balanced portfolio manager. The first part tries to determine the strategic long-term optimal hedge ratio, based on two crucial assumptions, a long-term expected return of zero and a long-term expected correlation of zero versus both equities and bonds. The study then shifts from a strategic to a tactical focus. Valuation models based on PPP, interest rate and economic growth differentials combined with short-term technical analysis tools are able to add value in the tactical allocation process.

Keywords: currency policy; hedge ratio; valuation; tactical allocation; technical analysis; risk (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1057/palgrave.jam.2240033

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