Could someone please explain what it means by “an investor whose currency exposure (say, to the GBP) is fully hedged”?
I see this phrase in questions and my mind just freezes. An clear example would be very much helpful. Thanks!
Means that investor already bought forward contract and he’s got his translation rate fixed for some transation in the future. No matter how the market exchange rate changes, he already know his exchange rate which he will use in his forward contract at expiration date. There is no exchange rate risk involved (butcredit risk is) and investor knows the outcome already at the inception.