Global Currency Hedging for Pension Funds
Session 1 - Recent developments in pension finance and actuarial science
9.00 - 10.00 Lecture I.1 Luis Viceira (Harvard University)
Abstract: This talk will consider the risk management problem of an investor who holds a diversified portfolio of global equities or bonds and chooses long or short positions in currencies to manage the risk of the total portfolio. Over the period 1975-2005, we find that a risk-minimizing global equity investor should short the Australian dollar, Canadian dollar, Japanese yen, and British pound but should hold long positions in the US dollar, the euro, and the Swiss franc. The resulting currency position tends to rise in value when equity markets fall. This strategy works well for investment horizons of one month to one year.
In the past 15 years the risk-minimizing demand for the dollar appears to have weakened slightly, while demands for the euro and Swiss franc have strengthened. These changes may reflect the growing role for the euro in the international financial system. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar.
Abstracts
- Lecture I.1 - Luis Viceira
- Lecture I.2 - Jon Exley
- Lecture I.3 - Jeremy Gold
- Lecture II.1 - Raimond Maurer
- Lecture II.2 - Matthias Weiss
- Lecture II.3 - David Blake
- Lecture III.1 - Richard Hinz
- Lecture III.2 - Keith Ambachtsheer
- Lecture III.3 - Zvi Bodie
- Lecture III.4 - Lans Bovenberg
- Key note speech - Lucas Papademos
