As investors increasingly use international diversification to improve their equity portfolio returns, the understanding and management of currency exposures takes on ever greater importance. While equity managers are generally comfortable analyzing their portfolios for equity-specific risks, such as sector, style or factor biases, for many investors, exchange rate risk remains an area of limited expertise.
This report shows how equity index futures provide investors a more flexible alternative to cash market products for managing the foreign exchange risks inherent in international equity index investments. This is illustrated with the specific case of a fully-funded non-U.S. investor gaining exposure to the S&P 500 via both CME E-mini S&P 500 equity index futures and exchange-traded funds (ETFs).
As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.
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CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.