why the currency effect is multiplicative in the calculation for E(r), what are the reason behind the additive and multiplicative, like what are factors deciding if one needs to be added or multiplied?
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We use a multiplicative model to calculate expected return in currency management because it is more accurate when the returns are not independent of each other. This is often the case with currency returns, as they can be affected by a variety of common factors, such as interest rates and economic growth.
We use a multiplicative model to calculate expected return in currency management because it is more accurate when the returns are not independent of each other. This is often the case with currency returns, as they can be affected by a variety of common factors, such as interest rates and economic growth.