Forward exchange rates are very poor predictors of future spot exchange rates, in contrast to the theories of covered interest rate parity and unbiased forward parity. As a result, one can take advantage of these apparent market “inefficiencies” by hedging the currency 100% when the forward rate pays you to do it and hedging 0% when the forward rate is against you. The differential forward strategy has generated consistently good results over a long time and over a broad set of currency pairs.
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Differential Forward Strategy
Posted by admin on June 30th, 2011 | Comments Off
Filed under Exchange rates | Tags: cash, Exchange rates
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