We just showed that exposure defined as a slope of the line linking the two points does work: in this (overly simple) example, all risk is gone. Show that if you would have followed your intuition and...


We just showed that exposure defined as a slope of the line linking the two points does work: in this (overly simple) example, all risk is gone. Show that if you would have followed your intuition and had hedged (sold forward) gbp 1.55m, or gbp 1.8m, or in fact any positive number, the uncertainty after such \hedging" would have been higher than before.




May 19, 2022
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