in y = y(LC) + 1 y(LC) is a foreign investors exposure to the exchange rate and y is a domestic investors exosure to the exchange rate right?
I believe y(LC) is the foreign companies exposure to its own (local) currency.
so wut is y?
Yes, I believe you are correct.
Sorry, just took me a minute.
if you think of the identity y(LC) as a correlation…you won’t get messed up. Ex. if there is no exposure to you and LC: y = 0 + 1
Does the fact that you spelled ICAPM wrong scare you?