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The calculation of the Hedged benchmarks supports only monthly vendor index/source data. Specifically, data in the Perform..perf_summary table where the PERF_FREQ_CODE = M.
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The hedged returns calculated for the custom index are based on a rolling 1-month hedge. You set the value to be hedged at the beginning of the month. The local returns provided by the index vendor are adjusted by a hedge return, where the hedge return equals the forward return for the period less the currency return for the period.
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Data | Stored | Notes |
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Source Index | ||
Base currency | RULES..ENTITY.BASE_CURRENCY | For the source entity, entered in the Entity Details tab |
Total Local return | PERFORM..PERF_SEC_RETURNS | Returns are in percent format |
Target Index | ||
Base currency | RULES..ENTITY.BASE_CURRENCY | For the target entity, entered in the Entity Details tab |
Hedge ratio | RULES..CUSTOM_INDEX_ATTRIBUTES.WEIGHT | New element required for this index |
Exchange Rates | ||
Spot rate at begin of period | SECURITY..FX_RATES.SPOT_RATE | |
Spot rate at end of period | SECURITY..FX_RATES.SPOT_RATE | |
Forward rate at begin of period | SECURITY..FX_RATES.FOR_1MNTH_RATE | New element for this type of index |
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For the example purposes, assume the following hedged example:
Source Index (USD BASE_CURRENCY) – Percent to Hedge: 100 Target Custom Benchmark (INR BASE_CURRENCY)
The following table lists the data for the source index for the Hedged benchmark.
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