Interview Guides
You are reviewing a liquid public-markets portfolio after a geopolitical escalation triggers a sharp selloff in one region and a flight to safety into USD assets. Your investment team wants a quick estimate of the mark-to-market impact on a concentrated book before the next risk meeting. Assume the positions are marked in local currency where relevant and translated to USD at current FX rates. You need to decide whether the drawdown is mostly a price move, a currency move, or both.
| Position | Holding | Entry Price | Current Price | Currency | FX Rate at Entry | Current FX Rate |
|---|---|---|---|---|---|---|
| Regional equity ETF | 1,200,000 units | 25.00 | 21.00 | Local | 0.20 USD/local | 0.18 USD/local |
| Sovereign bond fund | 8,000,000 units | 1.00 | 0.94 | Local | 0.20 USD/local | 0.18 USD/local |
| USD cash | 6,500,000 | 1.00 | 1.00 | USD | 1.00 USD/USD | 1.00 USD/USD |
Assume no transactions costs, no hedging, and no income accruals.
What is the portfolio's current USD value versus its entry value, and how much of the change comes from the local price move versus the FX move? Based on that decomposition, how would you describe the risk to the portfolio if the local currency weakens another 10%?