China-Africa Investment Risk

This paper analyzes the currencies of various African countries and China.In search of a risk premium found in the volatility of a currencv over time,that will show that currencies tend to move in a set of mean-reverting parameters.The study finds that currencies move away from a determined stabilized mean of volatility.Where the fluctuation of these currencies shows that the less risky currencies close quicker and more often than the more risky currencies. This implies that earnings in more flexible but lower risk currencies can stabilize earnings for investors.Making it easier to manage hedged portfolios in higher risk areas.The study also argues that though differing African countries have differing levels of risk,China's African Policy has failed to recognize this.Thirdly,the study shows that currency volatility is also measure of the liquidity and tradability of that currency.As a final note,the study finds that by eliminating controllable risks in a currency's movement identifies the underlying risk premium earned from a particular country.Which means hedged investors can limit their risks in higher risk areas,such that they are exposed to the uncontrollable portion of the risk in a particular currency.