RT Journal Article
SR Electronic
A1 Šoba, Oldřich
T1 The impact of exchange rate EUR/USD on the rate of return of bond investments denominated in US dollar from the point of view of euro investor
JF Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
YR 2014
VO 57
IS 6
SP 275
OP 286
DO 10.11118/actaun200957060275
UL https://acta.mendelu.cz/artkey/acu-200906-0029.php
AB Investment opportunities into foreign curruncies financial assets are rising because of financial markets globalization, financial markets integration and evolution of modern information technologies. The currency risk relates to these cases when investor converts cash from and into domestic currency. The currency risk is determined by unexcepeted change of exchange rate (currency of financial asset denomination / investor's domestic currency) during duration of the investment.Objective of the paper is quantification and analysis of exchange rate EUR/USD impact on the rate of return of bond investments denominated in US dollar from the point of view of a euro investor for investment horizons of different length.The analysis is realized for following investment horizons: 1 year, 2 years, 3 years, 5 years, 7 years, 10 year and 12 year. Complementary investment horizons are: month and 15 year. Bond investments denominated just US dollar are represented by investments into ING bond unit trust in period December 1989-December 2007. The unit trust invests into bonds with high rating (for example governmants bonds etc.). These bonds are denominated in USD only. Methodology of the analysis is based on quantification of proportion of exchange rate EUR/USD impact on the rate of return of bond investment denominated in USD. The share is based on basic piece of knowledge of the uncovered interest rate parity.