With the current situation in the Eurozone combined with the increasing percentage of revenue coming from overseas among the largest stocks in the Global S&P 100, FTSE 100, and S&P 500, there is a simultaneous increase in currency risk for many companies. How do you measure and deal with these risks?

The ongoing trend translates into increasing currency risk for asset managers also, and one example concerns the increased risk for GIIPS-country companies. In multi-currency scenarios, such as when an importer of foreign goods is located in one of the GIIPS countries, the local currency is devaluing relative to the Euro while debt services costs are going up. Business risks and total risks are increasing because there is a new currency exposure present.

We will examine options for measuring and dealing with these kinds of risks in one's portfolio and offer a perspective on global risk estimation and stress-testing. This increased volatility should result in increasing market risk and increasing tracking error to one's portfolio.