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Currency swaps as a hedging technique for an international real estate investment

Currency swaps as a hedging technique for an international real estate investment Uses Monte Carlo simulation to demonstrate the benefits of employing a currency swap to hedge the exchange rate exposure in a single international real estate investment. The only cashflow exposed to the currency fluctuations is the appreciation associated with the investment. Shows that this hedging technique has some potential for protecting the investor from adverse currency fluctuations if an international real estate investment is made. However, promises to explore unresolved issues in future research. Demonstrates that some elements of exchange rate risk may be hedged, resulting in improved risk‐adjusted returns. Thus extends earlier research in international property investment and suggests that international real estate strategies based on diversification (as opposed to currency plays) may be more effective than has been argued in previous research. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Finance Emerald Publishing

Currency swaps as a hedging technique for an international real estate investment

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References (33)

Publisher
Emerald Publishing
Copyright
Copyright © 1997 MCB UP Ltd. All rights reserved.
ISSN
0958-868X
DOI
10.1108/09588689710167834
Publisher site
See Article on Publisher Site

Abstract

Uses Monte Carlo simulation to demonstrate the benefits of employing a currency swap to hedge the exchange rate exposure in a single international real estate investment. The only cashflow exposed to the currency fluctuations is the appreciation associated with the investment. Shows that this hedging technique has some potential for protecting the investor from adverse currency fluctuations if an international real estate investment is made. However, promises to explore unresolved issues in future research. Demonstrates that some elements of exchange rate risk may be hedged, resulting in improved risk‐adjusted returns. Thus extends earlier research in international property investment and suggests that international real estate strategies based on diversification (as opposed to currency plays) may be more effective than has been argued in previous research.

Journal

Journal of Property Finance – Emerald Publishing

Published: Jun 1, 1997

Keywords: Diversification; Exchange rates; Hedging; International accounting; Real estate; Risk management

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