English, Article edition: Currency risk management: simulating the Canadian dollar Francisco Carrada-Bravo; Hassan K. Hosseini; Lorenzo Fernandez

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Bookmark: http://trove.nla.gov.au/version/9016
Physical Description
  • article
Language
  • English

Edition details

Title
  • Currency risk management: simulating the Canadian dollar
Author
  • Francisco Carrada-Bravo
  • Hassan K. Hosseini
  • Lorenzo Fernandez
Physical Description
  • article
Notes
  • Purpose – The purpose of this article is to investigate the return associated with a Canadian dollar (C$) investment in the USA under passive, random walk, value at risk, and Sharpe ratio strategies. Design/​methodology/​approach – To comply with the purpose, this paper used a GARCH model, and used, as basic data, daily C$ exchange rates and weekly US and Canadian interest rates on 90-day CDs, from January 2 to November 26, 2004. Findings – The empirical results suggest that currency returns are positively correlated to risk; and that the return provided by the random walk strategy beats the other strategies considered in this paper. Practical implications – The findings suggest that currency investment is similar to other forms of investment, since it shows a positive relationship between risk and return. It also supports the long-standing belief that sophisticated strategies do not beat simple-minded approaches such as a random walk strategy. Originality/​value – This paper uses a utility function to investigate the response of investors to risk and return under different aversion scenarios.
  • Canada, Economic models, Forecasting, Foreign exchange, International finance, Simulation
  • RePEc:eme:ijmfpp:v:2:y:2006:i:1:p:77-90
Language
  • English
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