Is Complete Hedging Optimal for International Bond Portfolios?

• Published in: Financial analysts journal Vol. 48; no. 4; pp. 37 - 47
• Main Authors: Victor S. Filatov, Rappoport, Peter
• Format: Journal Article
• Language: English
• Published: Charlottesville The Association for Investment Management and Research 01.07.1992; National Federation of Financial Analysts Societies; Taylor & Francis Ltd
• Subjects: American dollar; Asset management; Bond portfolios; Covariance; Currency; Diversification; Financial portfolios; Foreign assets; Foreign exchange rate risk; Foreign exchange rates; Foreign investment; Forward exchange; Hedging; International bonds; International markets; Investment policy; Investment risk; Investors; Mathematical models; Portfolio diversification; Portfolio management; Portfolio performance; Risk assessment; Standard deviation; Volatility; United States > US

International investments offer diversification benefits for investors, but they also expose portfolios to highly volatile currency movements. Some have argued that hedging currency exposure completely offers investors a free lunch--lower risk with no sacrifice of expected return. Complete hedging d...