SCR Calculator User Manual
Version 1.15.0.0 Last modified 2024-7-15
Partially Hedged Return Series
Hedged Returns Calculation
To compute a partially-currency-hedged returns series, the user would need to do it in a spreadsheet, before feeding into the calculator.
A partially hedged series can be computed using the formula
Hedged Return = Local Currency Return + (1 - Hedge Ratio) * FX Movement +/- Hedging Gain/Cost
The hedging gain/cost depends on a number of factors, such as:
- Hedging method used (e.g. cross-currency swap vs forwards)
- Interest rate term structure differential between the two currencies
- Basis difference and transaction costs