It arises lots of questions for a noobie. What if I wait and make a forward contract in a time when the rate is high and I am sure later on I will gain. How the risk is compensated? How the broker makes money out of it if it is risky?
What are your thoughts on an anti-home bias? I figure if your home market does worse and your currency weakens, your stocks are still relatively strong as you were focussed away from home. If instead the other market does worse, you may see your portfolio decrease dramatically, but at least your own economy is still good. Or is there no correlation between strong currency and current market strength?
AFAIK there are US funds (i.e. an ETF of S&P500) that trade both in GBP and USD and someone can choose what to buy. What is the difference between these two options? Does any bear less risk compared to the other? To make it more "extreme": Imagine someone living in UK (owns GDP) buying a US fund that trades in Euros (if I'm not wrong, you don't need currency account in Euros for this)... Would this make any sense? Would you call this "diversification"?
flybekvc In terms of currency risk it doesn't matter, what matters is extra transaction costs due to currency changing. If you have gdp and invest into a fund that is in gdp, you dont have to convert currency whereas if the fund was in usd you'd have to exchange for a cost. The fund still invests into international companies etc (assuming world broad fund) which is what exposes you to the currency risk.
Any contract is breakable but then you risk being sued for a breach. Forward contracts are usually binding until "novated" - i.e. negated and replaced by a new one...Tim
Let's say that I want to live my life using euros, in a non-euro country. My employeer can pay me in euros, but the salary is still set in pounds or something. How can immunize myself from my local currency? It's ok if the euro looses value, because I choose to use it.
Great video, simple explanation. Lovely stuff.
Splendid Presentation...👍👌
Thanks for the clear and concise illustration 🙏🙏🙏
Very good and informative video Thank you
Hi. Just a quick thank you for this video. Very clear and informative.
Beautifully explained.
Thank you
Brilliant explanations.
Super helpful, thank you!
It arises lots of questions for a noobie. What if I wait and make a forward contract in a time when the rate is high and I am sure later on I will gain. How the risk is compensated? How the broker makes money out of it if it is risky?
for retail investors at what point hedging currency's costs feels viable for the benefits? (minimum Investment threshold)
Can you do a video explaining how to calculate and quote a forward price?
You can calculate the forward rate by bootstrapping the yield curve
Is there a video on CCBS?
What are your thoughts on an anti-home bias?
I figure if your home market does worse and your currency weakens, your stocks are still relatively strong as you were focussed away from home. If instead the other market does worse, you may see your portfolio decrease dramatically, but at least your own economy is still good.
Or is there no correlation between strong currency and current market strength?
www.ea4fx.com/forex-mistakes/
AFAIK there are US funds (i.e. an ETF of S&P500) that trade both in GBP and USD and someone can choose what to buy. What is the difference between these two options? Does any bear less risk compared to the other?
To make it more "extreme": Imagine someone living in UK (owns GDP) buying a US fund that trades in Euros (if I'm not wrong, you don't need currency account in Euros for this)... Would this make any sense? Would you call this "diversification"?
flybekvc In terms of currency risk it doesn't matter, what matters is extra transaction costs due to currency changing.
If you have gdp and invest into a fund that is in gdp, you dont have to convert currency whereas if the fund was in usd you'd have to exchange for a cost.
The fund still invests into international companies etc (assuming world broad fund) which is what exposes you to the currency risk.
thanks is forward contract breakable ?
Any contract is breakable but then you risk being sued for a breach. Forward contracts are usually binding until "novated" - i.e. negated and replaced by a new one...Tim
Thank you!
Let's say that I want to live my life using euros, in a non-euro country. My employeer can pay me in euros, but the salary is still set in pounds or something. How can immunize myself from my local currency? It's ok if the euro looses value, because I choose to use it.