Q12C, exam 2005. For the first statement, solutions says: “Relevant risk is not volatility but contribution to total risk, which for currencies is minimal.” What does this mean? - sticky
It probably means the contribution of currencies to total risk is negligible.
^exactly. Over a long time period the contribution of currency risk to total risk is negligible due to reversion to the mean.
This question was stupid. I hated it. It was from SS we dont have (it was refactored) if i remember correctly
Yes Currency risk is not additive …and yeah tht Q got me a little confused as well until i realised it was revamped since