Variance of returns on foreign asset in local currency terms

Referring to CFAI 2010 AM, question 5E, they ask: calculate the risk of Slifer’s investment in Chinese equities measured in U.S. dollar terms. Show your calculations.

Answer says: the variance of the returns on foreign asset in U.S. Dollar terms = variance of foreign asset in local currency + Variance of the exchange rate + (2 × correlation between Foreign asset return and exchange rate movement × standard deviation of foreign asset in local currency × standard deviation of the exchange rate) Where is this formula from? Is it still in 2015?

the reading in currency risk management has changed from 2014 onwards.

It’s the standard formula for the variance of a portfolio with two assets.

The sublety here is that 100% of the assets are in the foreign investment, and 100% of the assets are subject to the currency exchange rate, so w1 = w2 = 100%.

Thanks for the clarification S2000 - I realized the weights were omitted in this formula but I didnt know the intuition behind it.

My pleasure.