1. Investing globally can add return to a domestic-only portfolio, while at the

Question

1. Investing globally can add return to a domestic-only portfolio, while at the same time reducing the risk of the portfolio. Global investing, however, adds foreign currency exchange risk. In terms of foreign currency risk, compare a cross hedge to a proxy hedge. Provide a link to any site accessed. (Do not use Investopedia, Wikipedia, or similar sites.)

2. The Investment Policy Statement (IPS)

Remember these letters: RRTTLLU. They stand for Return, Risk, Time horizon, Taxes, Liquidity needs, Legal and regulatory concerns, and Unique circumstances. They represent the sections of the IPS for individuals as well as institutional investors. Discuss the development of any two of these sections for an individual investor.

Explanation / Answer

1. As you invest in a stock your portfolio is the sum of all investment's done by you at a particular time as you increase your investment in global market or domestic market your portfolio also faces similar risk in the form of problems emerging in the domestic market but your foreign investment might or might nor get affected, same is the scenario when you are doing the computation in opposite.

Understand proxy hedge as tringular arbitrage of currencies and Cross hedge as defaulted or stoppage as a result of non-availability of any dealer for the currency you desire so you go to the nearest currency which is perfectly correlated and available in the market.

Here are the linkswhich you can use:

https://www.betterment.com/resources/investment-strategy/why-international-bonds-but-not-currency-risk-belong-in-your-portfolio/

http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91308944

2. Risk- is inherent in every project or decision weather taken internally in domestic market or the foreign market as expected by the global scenario and event,s. Like Bre-exit had a very negative impact on the other currencies which have increased beyond a limit where central banks of the company had to intervene in order to regulate the impact on the nation and effected businesses of the people as a result.

Return- Return is the Benefit or reward for which the investor will deposit in return for the risk he has to take for the investment done by him in the portfolio. More risk implies more rewards and vice-a-versa.

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