How Does a Quanto Hedge the Currency Risk a U

question 15

Essay

How does a quanto hedge the currency risk a U.S.investor encounters when investing in foreign indexes?

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Definitions:

Foreign Exchange Market

A global market for trading currencies against one another, determining the exchange rates.

U.S. Dollar

The official currency of the United States, used as a standard monetary unit in international trade.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, determining foreign exchange rates for every currency.

Organized Exchange

is a regulated marketplace where securities, commodities, derivatives, and other financial instruments are traded between members.