Passive Currency Hedging Analysis

Investing in international portfolios comes with the added risk of foreign currency exposure. The goal of our project is to examine various hedging strategies used to eliminate or reduce this risk over portfolios of multiple asset types. Specifically we will look at the costs and returns to portfolios which use fixed versus variable interval rebalancing, as well as different target hedge ratios. Using MATLAB, we build an engine to construct such portfolios and study the effects of different strategies. Ultimately this will help to devise an optimal approach to hedging currency exchange risk.