For you FX experts out there…
Example assumes USD investor hedged EUR with 6mo FWD. In comparing the “At initiation” Roll yield, versus the “At Maturity” Roll Yield…for example if the investor wanted to re-hedge at maturity
The Roll Yield is Negative in both cases, but becomes more negative when the investor wants to re-hedge.
My Question: Is the Roll Yield more negative because:
A. The 6mo forward points became more negative (-19 to -27)
B. The EUR spot rate appreciated versus USD (1.3935 to 1.4189)
C. Both combined
Thank you in advance!