TITLE:
The Hidden Risk Factor
AUTHORS:
J. H. Witte, D. Ples, J. Corominas
KEYWORDS:
Currency Risk; Risk Premium; Risk Factor; FX Hedge; Currency Overlay
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.3 No.3A,
October
8,
2013
ABSTRACT: To achieve maximum returns consistent with an investor’s appetite for risk, the correct identification and estimation of all relevant risk factors in a portfolio are necessary. In this paper, we identify the role of foreign currency as an important risk factor from an international investor’s point of view.