Global Asset Allocation and Currency Hedging Strategies for Taiwan's Pension Funds
Date Issued
2006
Date
2006
Author(s)
Yi-Wen, Li
DOI
en-US
Abstract
In this paper, we examine asset allocation strategies and currency hedging strategies for Taiwanese pension funds. We use Markowitz Mean-Variance model to derive strategic asset allocation of deterministic lifestyle pension plan. Then, we hedge currency risks by using full hedge strategy, selective hedge strategy, and optimal hedge strategy under currency overlay policy and portfolio hedging policy. We find that under currency overlay policy, un-hedge strategy is the best strategy for the entire period or when NTD depreciates, and full hedge strategy is the best strategy when NTD appreciates. Under portfolio hedging policy, different hedging policies can be implemented according to how much risk fund managers are willing to bear, but optimal hedge strategy is always the most suitable strategy when NTD appreciates.
Subjects
資產配置
外匯避險
asset allocation
currency hedging
Type
thesis
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