2. Suppose your client says, I am invested in Japanese stocks but want to eliminate my exposure...
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2. Suppose your client says, “I am invested in Japanese stocks but want to eliminate my exposure to this market for a period of time. Can I accomplish this without the cost and inconvenience of selling out and buying back in again if my expectations change?”
a. Briefly describe a strategy to hedge both the local market risk and the currency risk of investing in Japanese stocks.
b. Briefly explain why the hedge strategy you described in part ( a ) might not be fully effective.
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