Bridge over ocean
1 January 1998 Financial Analysts Journal Volume 54, Issue 1

Maintaining Consistent Global Asset Views (with a Little Help from Euclid)

  1. Brian D. Singer, CFA
  2. Kevin Terhaar
  3. John Zerolis

Global economic and capital market integration has led to a host of new concerns for plan sponsors and money managers. In such an environment, ensuring consistent capital market expectations, policies, and strategies among different base currencies is important. A primary difficulty is translating risk and correlation estimates from the home currency into any other currency. We provide a method for converting risk and correlation views. The method makes use of a geometric interpretation of risks and correlations, dramatically simplifying the requisite calculations.

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