The manager of a single-currency portfolio is investigating methods to hedge the portfolio. If he regresses the return of the portfolio on the return of the currency, the: A) slope coefficient of the regression represents the economic risk. B) slope coefficient of the regression represents the delta risk. C) intercept coefficient of the regression represents the economic risk.

A

A

b? seeing how well your hedge responds to movements in the portfolio?

A

can someone explain their choice of A

Mike0021: Its one of the 2 definitions of economic risk in the currency risk management article( I think). So i answered it more from memory.

mike0021 here is the explanation from Schweser: Your answer: A was correct! This is the measure of economic risk; it is the covariance of the portfolio return with the currency return over the variance of the currency return. Estimating this measure is part of composing a minimum-variance hedge.

I guess I should start learning those definitions. Helpful question, Dwight!

^ maratikus do you only post if you know the answer for sure? You seem to get a high proportion of the answers correct.