The relationship between exchange rate exposure, currency risk management and performance of international equity funds

This paper assesses the currency risk management policies for a sample of Australian international equity trusts. The relevance of currency risk management is considered in the context of exchange rate exposure and performance measures. The study incorporates differing economic climates and particular emphasis is given to the Asian crisis in mid-1997. Our results indicate that a good proportion of funds do implement specific currency risk management policies. Furthermore, we find that for those funds managing currency risk, there is some evidence of a favourable impact on currency exposure and fund performance.

Canonical valuation of options in the presence of stochastic volatility

Proposed by M. Stutzer (1996), canonical valuation is a new method for valuing derivative securities under the risk-neutral framework. It is non-parametric, simple to apply, and, unlike many alternative approaches, does not require any option data. Although canonical valuation has great potential, its applicability in realistic scenarios has not yet been widely tested. This article documents the ability of canonical valuation to price derivatives in a number of settings. In a constant-volatility world, canonical estimates of option prices struggle to match a Black-Scholes estimate based on historical volatility. However, in a more realistic stochastic-volatility setting, canonical valuation outperforms the Black-Scholes model. As the volatility generating process becomes further removed from the constant-volatility world, the relative performance edge of canonical valuation is more evident. In general, the results are encouraging that canonical valuation is a useful technique for valuing derivatives. (C) 2005 Wiley Periodicals, Inc.

Hurt feelings in couple relationships: Exploring the role of attachment and perceptions of personal injury

This research program focused on perceptions of the appraisals and emotions involved in hurtful events in couple relationships. Study I tested the broad proposition that hurt feelings are elicited by relational transgressions that generally imply relational devaluation and that evoke a sense of personal injury by threatening positive mental models of self and/or others. Participants (N = 224) provided retrospective accounts of an experience of being hurt by a romantic partner. These accounts, together with expert judges' ratings, showed that most hurtful events involved relational transgressions that signal both relational devaluation and threat to positive mental models; however, relational devaluation was relatively unimportant in explaining the hurt associated with partners' distrust. A sense of injury emerged as the dominant theme in open-ended accounts of emotional reactions; however, other negative emotions also featured and were related to the type of event reported. The emotion terms generated in Study I were used as stimuli in a word-sorting task (Study 2). This study confirmed that many of the terms were perceived specifically as injury related, and shed further light on the link between appraisals and emotions. Theoretical and practical implications of the findings are discussed.