Question
State Probability =1/3 Revenues (P*) GBP =980,000 USD/GBP 1.40 GBP 1,000,000 USD/GBP 1.50 3 GBP 1,070,000 USD/GBP 1.60 Compare the standard deviation of the hedged
State Probability =1/3
Revenues (P*) GBP =980,000
USD/GBP 1.40 GBP 1,000,000
USD/GBP 1.50 3
GBP 1,070,000
USD/GBP 1.60
Compare the standard deviation of the hedged position under your strategy and under the CFOs strategy. (Hint: compute first the expected value of the revenues of the two strategies, E(HP), then compute the variance of the two strategies, and then the standard deviations, Std(HP)). Who is right? You or the CFO?
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Guide To Finance Theory And Application Portfolio Mathematics
Authors: Professional Risk Managers' International Association (PRMIA)
1st Edition
0071731814
