To Hedge or not to Hedge?
To Hedge or not to Hedge?
<div> This paper examines the USDCAD exchange rate through a historical and statistical lens to inform long-term hedging strategies for Canadian investors with U.S. dollar exposures. We begin by discussing the historical evolution of USDCAD and demonstrate that the exchange rate shows statistically significant mean-reverting behaviour. <span>Using a cross-sectional analysis, we analyze the profit and loss of vanilla hedging as a function of spot exchange rate. </span><span>Further, we explore the relationship between USDCAD and U.S. equities, finding a strong, negative correlation post-2006, which has important implications for portfolio hedging. </span><span>Based on these insights, we propose a dynamic, level-based hedging strategy, that is not constrained and transcends the classical variance minimization approach to currency hedging.</span> </div>
- McGill University Canada
selected citations These citations are derived from selected sources.This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).0 popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.Average influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).Average impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.Average
Citations provided by BIP!Popularity provided by BIP!