dynamicfxportfolios
DESCRIPTION
This is a presentation on the actual progress of market timing indicators for FX Carry and Momentum portfolios. This presentation will be updated continously.TRANSCRIPT
Dynamic Trading of FX Carry and MomentumPortfolios
Lorenzo Bertolini
Cass Business School, City University, London
June 6, 2009
1 Introduction
2 Methodology
3 DataG10 FX and Yield DataG10 FX Carry and Momentum IndicesRisk-Factors & Risk Indicator
4 Benchmark Market Timing RulesMoving-Average Crossover RuleRisk-Indicator Filter RuleMoving Average Crossover/Risk-Indicator Combination
5 Conclusion
6 References
Outline
1 Introduction
2 Methodology
3 Data
4 Benchmark Market Timing Rules
5 Conclusion
6 References
What is Carry and Momentum Trading?
Definition: Carry Trading
A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds topurchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture thedifference between the rates, which can often be substantial, depending on the amount of leverage the investorchooses to use.source: http://www.investopedia.com/terms/c/currencycarrytrade.asp
Definition: Momentum Trading
An investment strategy that aims to capitalize on the continuance of existing trends in the market. Themomentum investor believes that large increases in the price of a security will be followed by additional gains andvice versa for declining values.source: http://www.investopedia.com/terms/m/momentum investing.asp
Carry and Momentum are popular FX Trading Styles
Carry and Momentum trading styles in FX markets areamongst the most popular trading strategies applied in themanagement of FX portfolios (see e.g. Acar [7], BIS-Survey2007 [5]).
There is evidence for positive returns from trading these twoinvestment styles (see e.g. Acar [7], Dunis [8], [4] andHochradl and Wagner et.al [6]).
Carry and Momentum strategies can incur periods of severedrawdowns (see e.g. Dunis [8]).
Factors driving FX Carry and Momentum Returns
Our research builds on three main directions in literature, which study the relationship between FX Carry andMomentum strategy returns and risk-factors:
Timing FX Carry/Momentum with RiskMetrics Volatility Estimates
Dunis [4] ,[8] finds that during periods of low FX market volatility FX Carry and Momentum trading strategiesperform better than they do during periods of high FX market volatility.
Relationship of FX Carry portfolios with risk-factors and monetary variables
Burnside et al. [1] examined the relationship between FX Carry trading returns and risk-related and monetarytimeseries. They found no evidence for a linear relationship on a monthly timeframe.
Risk-Factors as Inputs for Market Timing Indicators
Coudert [3] calculates logistic-regression based early warning indicators with risk-factors as inputs. He achievedgood results when predicting equity market crises and poor results when predicting currency crises.
Addressed Research Questions
Question 1
Do risk-factors allow to forecast periods of profitable FX Carryand/or Momentum trading?
Question 2
Do more advanced statistical models outperform simple markettiming rules?
Question 3
Do nonlinear neural network based modeling techniques add valueto the market timing process, thereby indicating nonlinearrelationships between FX Carry/Momentum Indices andrisk-factors?
Outline
1 Introduction
2 Methodology
3 Data
4 Benchmark Market Timing Rules
5 Conclusion
6 References
Simple Market Timing Benchmarks
We will test three simple market timing models and use them asbenchmarks for the more advanced statistical techniques:
Benchmark Market Timing Models
Simple Moving-Average Crossover Rule
Risk-Indicator Filter Rule
Combined Moving-Average Crossover/Risk-Indicator Rule
Statistical Classification Techniques
Several studies have reported enhanced predictability of signs ofreturns versus magnitudes of returns (see e.g. Christoffersen andDiebold [2]). Building on these results we will attempt to classifyperiods with positive FX Carry/Momentum returns and periodswith negative FX Carry/Momentum returns.
Adopted Classification Methods
k-Nearest Neighbors
Logistic Regression
Multi Layer Perceptron Neural Networks
Recurrent Neural Networks
Outline
1 Introduction
2 Methodology
3 DataG10 FX and Yield DataG10 FX Carry and Momentum IndicesRisk-Factors & Risk Indicator
4 Benchmark Market Timing Rules
5 Conclusion
6 References
Data Overview
We collected data at a weekly frequency from Bloomberg and Datastream. The categories of our data series are:
G10 FX and Yield Data
This data is used for the FX portfolio backtesting routines needed to test dynamic portfolio strategies with timingindicators.
G10 FX Carry and Momentum Indices
For the construction of the FX portfolio timing models, we need to construct FX Carry and FX Momentum indicesand transform their total returns timeseries into binary timeseries.
Risk-Factors & Risk Indicator
Financial risk-factors will serve as inputs to the FX portfolio timing models.
G10 1-Week Yields
Series DescriptionEU0001W INDEX EUR 1 WEEK YIELDSUS0001W INDEX USD 1 WEEK YIELDSJY0001W INDEX JPY 1 WEEK YIELDSBP0001W INDEX GBP 1 WEEK YIELDSSF0001W INDEX CHF 1 WEEK YIELDSCD0001W INDEX CAD 1 WEEK YIELDSAU0001W INDEX AUD 1 WEEK YIELDSNZ0001W INDEX NZD 1 WEEK YIELDSNIBOR1W INDEX NOK 1 WEEK YIELDSSK0001W INDEX SEK 1 WEEK YIELDS
Table: G10 1-Week Yield DataOverview (source: Bloomberg)
G10 1-Week Yield Data
EU
0001
W_I
ND
EX
12
34
5
US
0001
W_I
ND
EX
02
46
8
JY00
01W
_IN
DE
X
01
23
45
6
BP
0001
W_I
ND
EX
24
68
01
23
4
SF
0001
W_I
ND
EX
1980 1985 1990 1995 2000 2005 2010
CD
0001
W_I
ND
EX
12
34
56
AU
0001
W_I
ND
EX
34
56
78
NZ
0001
W_I
ND
EX
46
810
NIB
OR
1W_I
ND
EX
050
100
150
12
34
56
SK
0001
W_I
ND
EX
1980 1985 1990 1995 2000 2005 2010
1W Yield Data
G10 1-Month Yields
Series DescriptionEUR001M CURNCY EUR 1 MTH YIELDSUS0001M CURNCY USD 1 MTH YIELDSJY0001M CURNCY JPY 1 MTH YIELDSBP0001M CURNCY GBP 1 MTH YIELDSSF0001M CURNCY CHF 1 MTH YIELDSCDOR01 CURNCY CAD 1 MTH YIELDSBBSW1M CURNCY AUD 1 MTH YIELDSNFIX1M CURNCY NZD 1 MTH YIELDS
NIBOR1M CURNCY NOK 1 MTH YIELDSSTIB1M CURNCY SEK 1 MTH YIELDS
Table: G10 1-Month Yield DataOverview (source: Bloomberg)
G10 1-Month Yield Data
EU
R00
1M_C
UR
NC
Y
12
34
5
US
0001
M_C
UR
NC
Y
02
46
810
JY00
01M
_CU
RN
CY
02
46
8
BP
0001
M_C
UR
NC
Y
510
150
24
68
10
SF
0001
M_C
UR
NC
Y
1980 1985 1990 1995 2000 2005 2010
CD
OR
01_C
UR
NC
Y
24
68
BB
SW
1M_C
UR
NC
Y
510
15
NF
IX1M
_CU
RN
CY
46
810
12
NIB
OR
1M_C
UR
NC
Y
010
3050
020
4060
ST
IB1M
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
1M Yield Data
G10 FX Rates
Series DescriptionUSDEUR CURNCY USDEUR FX RATEJPYEUR CURNCY JPYEUR FX RATEGBPEUR CURNCY GBPEUR FX RATECHFEUR CURNCY CHFEUR FX RATECADEUR CURNCY CADEUR FX RATEAUDEUR CURNCY AUDEUR FX RATENZDEUR CURNCY NZDEUR FX RATENOKEUR CURNCY NOKEUR FX RATESEKEUR CURNCY SEKEUR FX RATE
Table: G10 FX Rates Overview(source: Bloomberg, Datastream)
G10 Foreign Exchange Rate Data
US
DE
UR
_CU
RN
CY
0.6
1.0
1.4
JPY
EU
R_C
UR
NC
Y
0.00
40.
008
GB
PE
UR
_CU
RN
CY
1.1
1.3
1.5
1.7
CH
FE
UR
_CU
RN
CY
0.35
0.50
0.65
0.5
0.7
0.9
CA
DE
UR
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
AU
DE
UR
_CU
RN
CY
0.5
0.7
0.9
1.1
NZ
DE
UR
_CU
RN
CY
0.4
0.5
0.6
0.7
NO
KE
UR
_CU
RN
CY
0.10
0.12
0.14
0.10
0.14
SE
KE
UR
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
EUR FX RATES
Calculating the G10 FX Carry and Momentum ReturnIndices
We build weekly carry and momentum return indices byconstructing FX portfolios following the ranking procedure adoptedby e.g. Vesilind [10] and Hochradl and Wagner [6]:
Asset Allocation Procedure
1 Rank the G10 currencies according to their yield (Carry) or52-period z-Score (Momentum).
2 Buy the 30% highest ranking currencies and fund thesepositions by selling the 30% lowest ranking currencies.
3 Hold the FX portfolio for one period.
We apply a spread of 10 basis points on fixed income positions, a spread of 0.03% on FX trades and slippage costs
of 0.02% on FX trades.
Asset Allocation Procedure: G10 Carry Portfolio
G10 Yields
010
2030
4050
60
1980 1985 1990 1995 2000 2005 2010
G10 Yields
010
2030
4050
60
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
EUR001M_CURNCYUS0001M_CURNCYJY0001M_CURNCYBP0001M_CURNCYSF0001M_CURNCYCDOR01_CURNCYBBSW1M_CURNCYNFIX1M_CURNCYNIBOR1M_CURNCYSTIB1M_CURNCY
Ranked G10 Yields
EU
R00
1M_C
UR
NC
Y
02
46
810
US
0001
M_C
UR
NC
Y
02
46
810
JY00
01M
_CU
RN
CY
02
46
810
BP
0001
M_C
UR
NC
Y
02
46
810
02
46
810
SF
0001
M_C
UR
NC
Y
1980 1985 1990 1995 2000 2005 2010
CD
OR
01_C
UR
NC
Y
02
46
810
BB
SW
1M_C
UR
NC
Y
02
46
810
NF
IX1M
_CU
RN
CY
02
46
810
NIB
OR
1M_C
UR
NC
Y
02
46
810
02
46
810
ST
IB1M
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
Ranked G10 Yields
Asset Allocation Procedure: G10 Carry Portfolio
G10 Yields
010
2030
4050
60
1980 1985 1990 1995 2000 2005 2010
G10 Yields
010
2030
4050
60
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
EUR001M_CURNCYUS0001M_CURNCYJY0001M_CURNCYBP0001M_CURNCYSF0001M_CURNCYCDOR01_CURNCYBBSW1M_CURNCYNFIX1M_CURNCYNIBOR1M_CURNCYSTIB1M_CURNCY
G10 Carry Portfolio Positions
EU
R00
1M_C
UR
NC
Y
−1.
00.
00.
51.
0
US
0001
M_C
UR
NC
Y
−1.
00.
00.
51.
0
JY00
01M
_CU
RN
CY
−1.
00.
00.
51.
0
BP
0001
M_C
UR
NC
Y
−1.
00.
00.
51.
0−
1.0
0.0
0.5
1.0
SF
0001
M_C
UR
NC
Y
1980 1985 1990 1995 2000 2005 2010
CD
OR
01_C
UR
NC
Y
−1.
00.
00.
51.
0
BB
SW
1M_C
UR
NC
Y
−1.
00.
00.
51.
0
NF
IX1M
_CU
RN
CY
−1.
00.
00.
51.
0
NIB
OR
1M_C
UR
NC
Y
−1.
00.
00.
51.
0−
1.0
0.0
0.5
1.0
ST
IB1M
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
Portfolio Positions:G10 Carry Ranker
Returns to the Long-Only G10 Carry Portfolio
G10 Carry Portfolio Performance
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Carry Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Carry Portfolio
market position Longmarket position Short
0.0
0.5
1.0
1.5
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Carry Portfolio
0.0
0.5
1.0
1.5
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
G10 Carry Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Carry Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
20.
00.
20.
4
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Carry Portfolio
−0.
20.
00.
20.
4
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
10.
10.
30.
5
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
10.
10.
30.
5
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Asset Allocation Procedure: G10 Momentum Portfolio
USD Cash Returns
0.6
0.8
1.0
1.2
1.4
1980 1985 1990 1995 2000 2005 2010
Asset: Cash USD 1M
02
46
810
Index
as.z
oo(x
)
USDEUR_CURNCY (left axis)US0001M_CURNCY (right axis)
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: CASH USD
market position Longmarket position Short
−0.
50.
00.
51.
0
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: CASH USD
−0.
50.
00.
51.
0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
USD Momentum
−3
−2
−1
01
23
1980 1985 1990 1995 2000 2005 2010
USD Total Returns and USD Momentum
−0.
20.
00.
20.
40.
60.
8
as.z
oo(x
)
USD Momentum (left axis)USD Returns (right axis)
Asset Allocation Procedure: G10 Momentum Portfolio
G10 Momentum
−4
−2
02
4
1980 1985 1990 1995 2000 2005 2010
G10 Momentum
−4
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Ranked G10 Momentum
CA
SH
EU
R
02
46
810
CA
SH
US
D
02
46
810
CA
SH
JP
Y
02
46
810
CA
SH
GB
P
02
46
810
02
46
810
CA
SH
CH
F
1980 1985 1990 1995 2000 2005 2010
CA
SH
CA
D
02
46
810
CA
SH
AU
D
02
46
810
CA
SH
NZ
D
02
46
810
CA
SH
NO
K
02
46
810
02
46
810
CA
SH
SE
K
1980 1985 1990 1995 2000 2005 2010
Ranked G10 Momentum
Asset Allocation Procedure: G10 Momentum Portfolio
G10 Momentum
−4
−2
02
4
1980 1985 1990 1995 2000 2005 2010
G10 Momentum
−4
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
G10 Momentum Portfolio Positions
CA
SH
EU
R
−1.
00.
00.
51.
0
CA
SH
US
D
−1.
00.
00.
51.
0
CA
SH
JP
Y
−1.
00.
00.
51.
0
CA
SH
GB
P
−1.
00.
00.
51.
0−
1.0
0.0
0.5
1.0
CA
SH
CH
F
1980 1985 1990 1995 2000 2005 2010
CA
SH
CA
D
−1.
00.
00.
51.
0
CA
SH
AU
D
−1.
00.
00.
51.
0
CA
SH
NZ
D
−1.
00.
00.
51.
0
CA
SH
NO
K
−1.
00.
00.
51.
0−
1.0
0.0
0.5
1.0
CA
SH
SE
K
1980 1985 1990 1995 2000 2005 2010
Portfolio Positions:G10 Momentum Ranker
Returns to the Long-Only G10 Momentum Portfolio
G10 Momentum Portfolio Performance
100
120
140
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Momentum Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Momentum Portfolio
market position Longmarket position Short
−0.
20.
00.
20.
4
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Momentum Portfolio
−0.
20.
00.
20.
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
G10 Momentum Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Momentum Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
20.
00.
10.
2
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Momentum Portfolio
−0.
20.
00.
10.
2
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
2−
0.1
0.0
0.1
0.2
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
2−
0.1
0.0
0.1
0.2
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Carry and Momentum Returns
FX Carry and Momentum Indices
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
FX Carry Index Perfromancevs. FX Momentum Index Perfromance
FX Carry IndexFX Momentum Index
−0.
10−
0.05
0.00
0.05
1980 1985 1990 1995 2000 2005 2010
FX Carry Total Returns
Carry Returns
−0.
050.
000.
050.
10
1980 1985 1990 1995 2000 2005 2010
FX Momentum Total Returns
Momentum Returns
FX Carry and Momentum Correlation
−0.10 −0.05 0.00 0.05
−0.
050.
000.
050.
10
Scatterplot: FX Carry Total Returns vs. FX Momentum Total Returns
Momentum Returns
Car
ry R
etur
ns
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−0.10 −0.05 0.00 0.05
−0.
050.
000.
050.
10
Scatterplot: FX Carry Total Returns vs. FX Momentum Total Returns
Momentum Returns
Car
ry R
etur
ns
Correlation: 0.03
Risk Indicator: Equity Volatility Component
Equity Risk Timeseries
VIX
_IN
DE
X
1030
5070
1020
3040
5060
VD
AX
_IN
DE
X
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Equity Volatility
Normalized Equity Volatility Timeseries
z−sc
ore:
VIX
_IN
DE
X
−2
02
4−
20
24
z−sc
ore:
VD
AX
_IN
DE
X1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Equity Volatility
Risk Indicator: Equity Volatility Component
Equity Volatility Timeseries
VIX
_IN
DE
X
1030
5070
1020
3040
5060
VD
AX
_IN
DE
X
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Equity Volatility
Equity Volatility Risk Indicator Component
−2
02
4
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Equity Volatility
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
z−score: VIX_INDEXz−score: VDAX_INDEXRisk Indicator: Equity Vola Component
Risk Indicator: Equity Positioning Component
Equity Positioning Timeseries
MS
CI G
row
th/V
alue
Inde
x
−0.
6−
0.4
−0.
20.
00.
00.
51.
01.
5
MS
CI D
efen
sive
s/C
yclic
als
Inde
x
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Equity Market Positioning
Normalized Equity Positioning Timeseries
z−sc
ore:
MS
CI G
row
th/V
alue
Inde
x
−3
−1
01
23
4−
20
24
z−sc
ore:
MS
CI D
efen
sive
s/C
yclic
als
Inde
x1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Equity Market Positioning
Risk Indicator: Equity Positioning Component
Equity Positioning Timeseries
MS
CI G
row
th/V
alue
Inde
x
−0.
6−
0.4
−0.
20.
00.
00.
51.
01.
5
MS
CI D
efen
sive
s/C
yclic
als
Inde
x
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Equity Market Positioning
Equity Positioning Risk Indicator Component
−2
02
4
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Equity Market Positioning
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
z−score: MSCI Growth/Value Indexz−score: MSCI Defensives/Cyclicals IndexRisk Indicator: Equity Posi Component
Risk Indicator: FX Volatility Component
FX Volatility Timeseries
JPM
VX
YG
7_IN
DE
X
1015
2010
1520
2530
JPM
VX
YE
M_I
ND
EX
1980 1985 1990 1995 2000 2005 2010
Risk Factors: FX Volatility
Normalized FX Volatility Timeseries
z−sc
ore:
JP
MV
XY
G7_
IND
EX
−2
02
4−
20
24
6
z−sc
ore:
JP
MV
XY
EM
_IN
DE
X1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: FX Volatility
Risk Indicator: FX Volatility Component
FX Volatility Timeseries
JPM
VX
YG
7_IN
DE
X
1015
2010
1520
2530
JPM
VX
YE
M_I
ND
EX
1980 1985 1990 1995 2000 2005 2010
Risk Factors: FX Volatility
FX Volatility Risk Indicator Component
−2
02
46
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: FX Volatility
−2
02
46
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
z−score: JPMVXYG7_INDEXz−score: JPMVXYEM_INDEXRisk Indicator: FX Vola Component
Risk Indicator: Yield and Credit Component
Yield and Credit Timeseries
US
SP
2_C
MP
L_C
UR
NC
Y
2060
100
140
US
SP
10_C
MP
L_C
UR
NC
Y
2060
100
.TE
DS
P_I
ND
EX
01
23
41
23
45
6
usa
cred
it sp
read
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Yield and Credit Conditions
Normalized Yield and Credit Timeseries
z−sc
ore:
US
SP
2_C
MP
L_C
UR
NC
Y
−2
02
4
z−sc
ore:
US
SP
10_C
MP
L_C
UR
NC
Y
−4
−2
02
4
z−sc
ore:
.TE
DS
P_I
ND
EX
−2
02
4−
20
24
z−sc
ore:
usa
cre
dit s
prea
d
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Yield and Credit Conditions
Risk Indicator: Yield and Credit Component
Yield and Credit Timeseries
US
SP
2_C
MP
L_C
UR
NC
Y
2060
100
140
US
SP
10_C
MP
L_C
UR
NC
Y
2060
100
.TE
DS
P_I
ND
EX
01
23
41
23
45
6
usa
cred
it sp
read
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Yield and Credit Conditions
Yield and Credit Risk Indicator Component
−4
−2
02
4
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Yield and Credit Conditions
−4
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
z−score: USSP2_CMPL_CURNCYz−score: USSP10_CMPL_CURNCYz−score: .TEDSP_INDEXz−score: usa credit spreadRisk Indicator: Yield and Credit Component
Risk Indicator: Safe Haven Component
Safe Haven Timeseries
GO
LDS
_IN
DE
X
400
600
800
1000
0.4
0.6
0.8
1.0
CH
FU
SD
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Safe Haven Assets
Normalized Safe Haven Timeseries
z−sc
ore:
GO
LDS
_IN
DE
X
−2
02
4−
3−
2−
10
12
3
z−sc
ore:
CH
FU
SD
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Safe Haven Assets
Risk Indicator: Safe Haven Component
Safe Haven Timeseries
GO
LDS
_IN
DE
X
400
600
800
1000
0.4
0.6
0.8
1.0
CH
FU
SD
_CU
RN
CY
1980 1985 1990 1995 2000 2005 2010
Risk Factors: Safe Haven Assets
Safe Haven Risk Indicator Component
−2
02
4
1980 1985 1990 1995 2000 2005 2010
Normalized Risk Factors: Safe Haven Assets
−2
02
4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
z−score: GOLDS_INDEXz−score: CHFUSD_CURNCYRisk Indicator: Safe Haven Component
Aggregated Risk Indicator
Risk Indicator Timeseries
−2
02
46
1980 1985 1990 1995 2000 2005 2010
Risk Indicator & Subcomponents
−2
02
46
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
Risk Indicator: Equity Vola ComponentRisk Indicator: Equity Vola ComponentRisk Indicator: Equity Posi ComponentRisk Indicator: FX Vola ComponentRisk Indicator: Yield and Credit ComponentRisk Indicator: Safe Haven Componentrisk indicator value
We calculate the aggregated RiskIndicator by equally weightingthe 5 sub-components:
Equity Volatility
Equity Positioning
FX Volatility
Yield and Credit
Safe Haven
Aggregated Risk Indicator
The Aggregated Risk Indicator
−3
−2
−1
01
23
1980 1985 1990 1995 2000 2005 2010
Aggregated Risk Indicator
risk indicator value
We will use the aggregated RiskIndicator as a measure forrisk-appetite (low indicatorvalues) and risk-aversion (highindicator values) in the markets.
Outline
1 Introduction
2 Methodology
3 Data
4 Benchmark Market Timing RulesMoving-Average Crossover RuleRisk-Indicator Filter RuleMoving Average Crossover/Risk-Indicator Combination
5 Conclusion
6 References
Timing the Carry Trade with a Moving Average CrossoverRule
Moving Average Crossover Signal
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
TradRule1: Moving Average Crossover (1,52)
100
150
200
250
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
FX Carry IndextsRollMean(FX Carry Index,1)tsRollMean(FX Carry Index,52)
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
Trading Signal
SignalPositions_EntriesExits LongSignalPositions_EntriesExits Short
0.0
0.2
0.4
0.6
0.8
1.0
1980 1985 1990 1995 2000 2005 2010
Market Entry/Exit Signals
0.0
0.2
0.4
0.6
0.8
1.0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
entry longexit longentry shortexit short
We create a simple Carry timingindicator, following standardmoving average crossover tradingrules:
Entry Long when the FXCarry Index crosses over the52-period moving average.
Entry Short when the FXCarry Index crosses underthe 52-period movingaverage.
Timing the FX Carry Trade with a Moving AverageCrossover Rule
Timed FX Carry Portfolio
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Carry Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Carry Portfolio
market position Longmarket position Short
0.0
0.4
0.8
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Carry Portfolio
0.0
0.4
0.8
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Carry Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Carry Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
20.
00.
20.
4
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Carry Portfolio
−0.
20.
00.
20.
4
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
0.0
0.1
0.2
0.3
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
0.0
0.1
0.2
0.3
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Timing the FX Momentum Trade with a Moving AverageCrossover Rule
Moving Average Crossover Signal
100
120
140
1980 1985 1990 1995 2000 2005 2010
TradRule1: Moving Average Crossover (1,52)
100
120
140
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
FX Momentum IndextsRollMean(FX Momentum Index,1)tsRollMean(FX Momentum Index,52)
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
Trading Signal
SignalPositions_EntriesExits LongSignalPositions_EntriesExits Short
0.0
0.2
0.4
0.6
0.8
1.0
1980 1985 1990 1995 2000 2005 2010
Market Entry/Exit Signals
0.0
0.2
0.4
0.6
0.8
1.0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
entry longexit longentry shortexit short
We create a simple Momentumtiming indicator, followingstandard moving averagecrossover trading rules:
Entry Long when the FXMomentum Index crossesover the 52-period movingaverage.
Entry Short when the FXMomentum Index crossesunder the 52-period movingaverage.
Timing the FX Momentum Trade with a Moving AverageCrossover Rule
Timed FX Momentum Portfolio
100
120
140
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Momentum Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Momentum Portfolio
market position Longmarket position Short
−0.
6−
0.4
−0.
20.
0
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Momentum Portfolio
−0.
6−
0.4
−0.
20.
0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Momentum Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Momentum Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
4−
0.2
0.0
0.2
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Momentum Portfolio
−0.
4−
0.2
0.0
0.2
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
5−
0.3
−0.
10.
1
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
5−
0.3
−0.
10.
1 CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Timing the FX Carry Trade with a Risk Indicator FilterRule
Risk Indicator Signal
−3
−2
−1
01
23
1980 1985 1990 1995 2000 2005 2010
TradRule1: Risk Indicator Filter
−3
−2
−1
01
23
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
Risk−Appetite Indicatorthreshold line: 0
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
Trading Signal
SignalPositions_EntriesExits LongSignalPositions_EntriesExits Short
0.0
0.2
0.4
0.6
0.8
1.0
1980 1985 1990 1995 2000 2005 2010
Market Entry/Exit Signals
0.0
0.2
0.4
0.6
0.8
1.0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
entry longexit longentry shortexit short
We create a Risk-Indicator basedCarry timing indicator, followingthe following trading rules:
Entry Long when theRisk-Appetite Indicatorcrosses over the zero-line.
Entry Short when theRisk-Appetite Indicatorcrosses under the zero-line.
Timing the FX Carry Trade with a Risk Indicator FilterRule
Timed FX Carry Portfolio
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Carry Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Carry Portfolio
market position Longmarket position Short
−0.
4−
0.2
0.0
0.2
0.4
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Carry Portfolio
−0.
4−
0.2
0.0
0.2
0.4
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Carry Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Carry Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
4−
0.2
0.0
0.2
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Carry Portfolio
−0.
4−
0.2
0.0
0.2
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
2−
0.1
0.0
0.1
0.2
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
2−
0.1
0.0
0.1
0.2
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Timing the FX Momentum Trade with a Risk IndicatorFilter Rule
Risk Indicator Signal
−3
−2
−1
01
23
1980 1985 1990 1995 2000 2005 2010
TradRule1: Risk Indicator Filter
−3
−2
−1
01
23
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
Risk−Appetite Indicatorthreshold line: 0
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
Trading Signal
SignalPositions_EntriesExits LongSignalPositions_EntriesExits Short
0.0
0.2
0.4
0.6
0.8
1.0
1980 1985 1990 1995 2000 2005 2010
Market Entry/Exit Signals
0.0
0.2
0.4
0.6
0.8
1.0
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
entry longexit longentry shortexit short
We create a Risk-Indicator basedMomentum timing indicator,following the following tradingrules:
Entry Long when theRisk-Appetite Indicatorcrosses over the zero-line.
Entry Short when theRisk-Appetite Indicatorcrosses under the zero-line.
Timing the FX Momentum Trade with a Risk IndicatorFilter Rule
Timed FX Momentum Portfolio
100
120
140
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Momentum Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Momentum Portfolio
market position Longmarket position Short
−0.
40.
00.
20.
40.
6
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Momentum Portfolio
−0.
40.
00.
20.
40.
6
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Momentum Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Momentum Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
3−
0.1
0.1
0.2
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Momentum Portfolio
−0.
3−
0.1
0.1
0.2
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
20.
00.
10.
2
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
20.
00.
10.
2CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Timing the FX Carry Trade with a combined MovingAverage/Risk Appetite Signal
Combined Moving Average/Risk Appetite Signal
0.6
1.0
1.4
1980 1985 1990 1995 2000 2005 2010
Position Signal: Aggregated Strategy Signal
position
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Position Signal: Moving Average Crossover (1,52)
position
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Filter Signal: Risk Indicator Filter
filter
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Aggregated Strategy Signal
market position
−2
02
1980 1985 1990 1995 2000 2005 2010
Strategy Trades
buysell
Trading Rules:
Long When the MovingAverage Rule AND theRisk-Indicator rule are long.
Short When the MovingAverage Rule AND theRisk-Indicator rule are short.
Timing the FX Carry Trade with a combined MovingAverage/Risk Appetite Signal
Timed FX Carry Portfolio
100
150
200
250
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Carry Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Carry Portfolio
market position Longmarket position Short
0.0
0.2
0.4
0.6
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Carry Portfolio
0.0
0.2
0.4
0.6
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Carry Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Carry Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
3−
0.1
0.0
0.1
0.2
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Carry Portfolio
−0.
3−
0.1
0.0
0.1
0.2
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
050.
050.
15
Performance Attribution: G10 Carry Portfolio @ 2009−05−15
−0.
050.
050.
15CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Timing the FX Momentum Trade with a combined MovingAverage/Risk Appetite Signal
Combined Moving Average/Risk Appetite Signal
0.6
1.0
1.4
1980 1985 1990 1995 2000 2005 2010
Position Signal: Aggregated Strategy Signal
position
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Position Signal: Moving Average Crossover (1,52)
position
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Filter Signal: Risk Indicator Filter
filter
−1.
00.
01.
0
1980 1985 1990 1995 2000 2005 2010
Aggregated Strategy Signal
market position
−2
02
1980 1985 1990 1995 2000 2005 2010
Strategy Trades
buysell
Trading Rules:
Long When the MovingAverage Rule AND theRisk-Indicator rule are long.
Short When the MovingAverage Rule AND theRisk-Indicator rule are short.
Timing the FX Momentum Trade with a combined MovingAverage/Risk Appetite Signal
Timed FX Momentum Portfolio
100
120
140
1980 1985 1990 1995 2000 2005 2010
RoI Index of: G10 Momentum Portfolio
Strategy RoI Index
−1.
0−
0.5
0.0
0.5
1.0
1980 1985 1990 1995 2000 2005 2010
TradingStrategy: G10 Momentum Portfolio
market position Longmarket position Short
−0.
3−
0.1
0.1
0.3
1980 1985 1990 1995 2000 2005 2010
StrategyReturns: G10 Momentum Portfolio
−0.
3−
0.1
0.1
0.3
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
fxyieldtransactionsslippagetotal
Timed FX Momentum Portfolio Components
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
Components Positions: G10 Momentum Portfolio
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
1980−01−04 1983−09−09 1987−05−15 1991−01−18 1994−09−23 1998−05−29 2002−02−01 2005−10−07
−1.
0−
0.5
0.0
0.5
1.0
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
−0.
3−
0.1
0.1
1980 1985 1990 1995 2000 2005 2010
Portfolio Components StrategyReturns: G10 Momentum Portfolio
−0.
3−
0.1
0.1
Index
as.z
oo(x
)
1980 1985 1990 1995 2000 2005 2010
CASH EURCASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
4−
0.2
0.0
0.1
Performance Attribution: G10 Momentum Portfolio @ 2009−05−15
−0.
4−
0.2
0.0
0.1 CASH EUR
CASH USDCASH JPYCASH GBPCASH CHFCASH CADCASH AUDCASH NZDCASH NOKCASH SEK
Outline
1 Introduction
2 Methodology
3 Data
4 Benchmark Market Timing Rules
5 Conclusion
6 References
Dynamic FX Portfolio Trading: Status-Quo
We built a software for backtesting portfolios of tradingsystems.
We tested benchmark FX Carry and Momentum portfoliotiming strategies with mixed results.
The approach of combining different types of market timingrules looks promising.
Next steps: Calculation of the statistical market timingindicators based on risk-factors.
Outline
1 Introduction
2 Methodology
3 Data
4 Benchmark Market Timing Rules
5 Conclusion
6 References
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