Hedging Foreign Exchange Risk - An Evaluation of the Optimal Hedge Ratio Determined by VaR
The purpose of this study is to examine the optimal hedge ratio for the currency exposure of foreign investments. The optimal hedge ratio is determined after evaluating our portfolios from the three perspectives; ex-ante, ex-post and profit/loss. The ex-ante perspective is examined by the usage of historical simulation to calculate VaR on 11 portfolio pairs. Each pair consists of a portfolio with
