Have you ever seen a question from CFAi where you had to add 1 to the factor sensitivity?
Not yet. Ask me again tomorrow and maybe I’ll have a different answer though!
I NEVER get when its appropriate or not to do that. I am not going to add one.
My understanding of the issue goes back and forth, but I think the rule is as follows: Let’s say you’re a US investor purchasing stock in a Swiss company. Your model has various sensitivities (Swiss, French, Japanese, British). You would need to add 1 to the Swiss Currency sensitivity because the company is located there. You would not add 1 to any other currency.
yeah… if they tell us that the swiss firm is sensitive to their our currency , then we need to add one in order to show that as a US investor we are also exposed to the fx movemebt