Cai has USD5,000,000 of cash in the portfolio, and he wants to use these funds to invest JPY600,000,000 in the Japanese equity market. To preserve the portfolio's liquidity, Wintermantle proposes that Cai achieve the JPY600,000,000 exposure by equitizing the portfolio's cash. He suggests using a three-month futures contract on the Nikkei 225 Index that is currently valued at JPY8,935,000. Japanese government bonds (JGBs), which Wintermantle believes are equivalent to risk-free bonds, currently yield 1.5% annually. Cai agrees with Wintermantle but expresses concern about unfavorable moves in the value of the Japanese yen. He asks whether it would be possible to completely hedge foreign currency risk. Wintermantle responds that in order to fully hedge yen currency risk, he would need to hedge foreign equity market exposure as well as the currency exposure.
Is Wintermantle's response to Cai's question about fully hedging Japanese yen currency risk most likely correct?
| Yes | |
| No, he is incorrect about hedging currency risk | |
| No, he is incorrect about hedging foreign equity market exposure |
这题目为何选A，hedge currency 不是很难么，因为value是无法预知的，而且hedge equity market exposure怎么会用来hedge currency?
我的理解是如果做境外投资，如果只是对冲foreign currency risk，为何还要对冲equity risk?
请指正
