2015 AM 9B-Currency

For object 2, why is the volatility of R DC(USD) = volatility of R FC (EUR) if using currency Forward to hedge?

I can’t wrap my head around this…

Figured it out…Because Std Dev fx =0 -> Std Dev Rdc = Std Dev R fc. This is a tricky question! I’m wondering how many peopled figured it out on the spot…

You may be over thinking this. If you are exposed to X and Y, but eliminate exposure to Y, you are only exposed to X. Fully hedging currency risk ensures Rdc is Rfc and stdev dc = stdev fc

Yeah, I have hard time linking their language to the knowledge…sometimes I’m just completely lost in their language…What are they trying to ask?