NO.PZ202212300200001502
问题如下：
Following
analysis of Indian economic fundamentals, C&M’s currency team expects
continued stability in interest rate and inflation rate differentials between
the United States and India. C&M’s currency team strongly believes the US
dollar will appreciate relative to the Indian rupee.
C&M would like
to exploit the perceived alpha opportunity using forward contracts on the
USD10,000,000 Bhatt portfolio.
Recommend the trading strategy
C&M should implement. Justify your
response.
选项：
解释：
Correct Answer:
Given C&M’s
research conclusion and the IPS constraints, the currency team should
under-hedge Bhatt’s portfolio by selling the US dollar forward against the
Indian rupee in a forward contract (or contracts) at no less than a 75% hedge
ratio of the portfolio’s USD10,000,000 market value. By under-hedging the
portfolio relative to the “neutral” (100% hedge ratio) benchmark, the team
seeks to add incremental value on the basis of its view that the US dollar will
appreciate against the Indian rupee while maintaining compliance with the IPS.
Since the Indian
rupee is assumed to depreciate against the US dollar, a 100% hedge ratio would
largely eliminate any alpha opportunity. However, a hedge ratio greater than
75% but less than 100% (as dictated by the plus or minus 25% versus neutral IPS
constraint) provides the opportunity to capture currency return in the expected
US dollar appreciation against the Indian rupee.
如题，题目中提到了两个条件，一个是利差稳定，一个预期美元即将会上升。
从利差稳定，不是会推导出用Carry trade吗？
我下面这样回答可以吗？
Carry trade strategy is to borrow in low yield currency and invest in high yield currency, the interest rate differentials are the most important component of profit of carry trade, so this strategy is suitable for stable market that with stable interest rate diffferentials between 2 countries.
Given that expectation on stability in interest rate and inflation rate differentials between the United States and India, C&M should implement carry trade strategy.
