Currency Risk Managament

I am facing trouble understanding in the calculation of hedged return in currency risk management. Could somebody explain what is the significance of -> Vo(-Ft+Fo) ??

I can learn it by rote but that wont help me in the long term :frowning:

Ft - F0 = Change in Futures price

V0 = Initial Value of portfolio.

Though the futures contract is marked to market daily - the end result is the above.

Instead of looking at it in the manner presented - think of it in the below manner:

V0 (-Ft + F0) = -V0 * (Ft-F0)

-V0 -> you sold a forward / futures contract for V0.

Ft - F0 = Change in the futures/ Forward price (between when you took the contract F0 and now Ft).

Thanks CPK … i had totally not acccounted for it being marked to matket!!! It is these learnins that make CFA worth it