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A note on currency-hedging

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  • Rodrigo Alfaro
  • Natan Goldberger

Abstract

In this note we analyze if currency hedging reduces the volatility of a portfolio. Based on historical data (2000m1-2018m12), we found that optimal levels of hedging will depend on the degree of risk of the underlying asset, being full-hedging for the case of high-quality sovereign bonds and very small hedging for equity indexes. Finding are consistent across both US and EU assets and different Latam currencies.

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  • Rodrigo Alfaro & Natan Goldberger, 2020. "A note on currency-hedging," Working Papers Central Bank of Chile 859, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:859
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_859.pdf
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    References listed on IDEAS

    as
    1. Augusto Castillo R. & Rafael Aguila, 2005. "Estrategias Optimas De Cobertura En Presencia De Incertidumbre En Costos Y Cantidad," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 8(2), pages 88-110.
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