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can someone please let me know how to translate a performance return from USD to EUR. For instance, I have a time series (return) over 7 years from an US hedge fund and would like to translate it into EUR return. I am not interested in any form of hedging, I just need the return to be denominated in EUR

Thank you very much!

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closed as off-topic by noob2, Bob Jansen Aug 24 '16 at 7:16

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First you build a total return index for the HF starting at say 100 so it might look like {100,105,...} if the first period return is 5% etc. These are the dollar amounts owned by an US investor who started with 100 USD.

Then you translate these numbers into EUR by dividing by the time series of historical EURUSD exchange rates which might look like {1.3125,1.2745,...).

Then you compute the EUR returns from these EUR prices by the usual formula $\frac{P_{t+1}-P_t}{P_t}$

P.S. If you do the algebra on the above procedure you will see that the EUR returns are $-1+\frac{e_{t-1}}{e_t}(1+r_t)$ for t = 1 to n, which however may be more difficult to remember than the straightforward steps above.

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