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智茵同学 · 2024年05月19日

Use forward contract to under hedge currency exposure的简答题。

  1. CFA III
  2. Derivative

* 问题详情，请 查看题干

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.

老师好，作为简答题我这样回答可以吗？

To capture alpha opertunities, with expectation that currency will appriciate, we should reduce hedge or increase the long position in the currency.(原理)

Given the strongly expectation of appreciation of USD and IPS with discretion of 25% deviation from neutral position of USD 10,000,000, under hedge strategy should be implemented.(i.e. To use forward contract of 7.5M USD to hedge the portfolio. 7.5M is from 10M*(100%-25%)=10M*75%=7.5M). （证据+结论）


So that if the USD really appreciate, then the 2.5M USD exposure left could help to add alpha value for Bhatt. （补充说明？）


1）想确认一下，关于结论，关键是回答出under hedge strategy，还是回答出To use forward contract of 7.5M USD to hedge the portfolio？（就是关于这个recommended strategy到底要写到多具体）

2.

1)我是否需要写出所用forward合约的notioanl amount是7.5M？

2)如果需要，是否需要写出7.5M是怎样来的？

3)如果要，计算过程里用7.5M简写可以吗？还是需要写成 7,500,000? (如果可以简写，感觉可以降低考试时写错小数位的机会)

3.最后关于alpha怎么来的这句话“So that if the USD really appreciate, then the 2.5M USD exposure left could help to add alpha value for Bhatt.” 我需要写吗? 还是只需要点出了to use forward contract under hedage就可以了？


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1 个答案

pzqa31 · 2024年05月20日

嗨，爱思考的PZer你好：


具体要写到什么程度其实没有个固定说法，一般题目也会说清楚的，比如这道题只是问策略这个层面，其实就是结合市场观点和IPS讨论hedge不hedge,under hedge还是overhedge这个维度就可以了。同学写上具体数字是没问题（前提是别算错了），咱们可以参考这道题的答案，并没有细致到具体数字，而且其实说了greater than 75% but less than 100%，和你具体计算的数字就是统一的，本质一个意思。但是需要注意的是，如果题目问了具体forward规模是多少这种，这就涉及具体数字了，就要具体写了，如果再进一步说要求计算过程的，那就还要加一个计算过程。所以总体来讲看题目要求。同学写的这个我觉得问题不大，补充说明这句可写可不写。

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