Currency Hedging within the iESG: Composite Portfolios
Document ID: 2007-85 (previously 2007/010)
Published on: 1st December 2007
Author: Colin Holmes & Graeme Lawson
The B+H iESG enables users to model asset returns from several different asset classes, across a number of different economies, within the same simulation model. Asset returns denominated in a foreign currency can be transformed into any other currency via the simulated exchange rate process.
A simple way for iESG users to do this, without requiring any post-processing on simulation output, is by setting up a Composite Portfolio. This functionality allows users to output returns on a portfolio of the assets modelled within their simulation. Out of all currencies modelled, the user can choose the currency in which the returns of the portfolio are denominated. In addition, the user can specify whether the FX risk has been hedged, or is left unhedged.
