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17
votes
4answers
202 views

What are the effects of turning a backed currency into a fiat currency?

I hear a lot of debate over the removal of the U.S. Dollar's precious metal backing and the subsequent inflation rates, but is there any proven relationship between unbacked currency and extreme ...
12
votes
2answers
745 views

Effective Euro-USD (EURUSD) Exchange Rate Prior to Euro's Existence

Motivation: I am running a quantitative analysis that requires long-term, exchange rate data. Problem: Does anyone have methods for dealing with the EURUSD exchange rate prior to the Euro's existence?...
7
votes
2answers
651 views

Should I use currency hedged or unhedged returns for a global equity allocation model?

I am building a global tactical equity allocation model. The model will help determine an optimal allocation amongst a number of major developed and emerging stock markets (represented for my purposes ...
7
votes
2answers
444 views

Looking for Research Paper on Creation of Currency Baskets

I came across a paper, not sure it originated from academia or a blog or such, that reported on applying principal components to build currency baskets from a set of individual currency pairs and to ...
5
votes
1answer
176 views

CNY Devaluation: Why EUR up, USD down?

The second unexpected devaluation of the Chinese currency CNY caused some turbulent market movements in currencies today. I was surprised that the EUR went to a 1-week high against the USD up by ...
5
votes
1answer
184 views

Is trading mean reversion of small principal components of prices profitable?

Many have told me that it is a good idea to look at the third principal component (PC) of yield curve movements, as well as third and fourth PC of G10 currencies. They claim these PCs represent "...
5
votes
2answers
103 views

Calculating probability of Yuan's slump from options market

http://www.bloomberg.com/news/articles/2016-01-06/if-options-traders-are-right-the-yuan-s-slump-is-far-from-over Contract prices indicate a 79 percent probability that the currency will weaken ...
4
votes
2answers
3k views

Why is there onshore and offshore currency?

I hear a lot about offshore and onshore currency, but I don't understand the difference between them. What is the difference between onshore and offshore currency in a country? Besides that, why is ...
4
votes
2answers
147 views

Currency forwards implied interest rates

I am calculating implied interest rates using covered interest rate parity theorem. I am looking at the Australian US currency pair. When evaluating day counts, should I be using Actual/365 for ...
4
votes
3answers
379 views

How to most optimally perform currency conversions when backtesting on portfolio level?

I am currently expanding my own strategy profiling and testing platform which partly consists of a portfolio backtesting module. The backtest engine processes tick based data (quotes for currencies, ...
4
votes
3answers
115 views

How does US banks ensure that other country's banks aren't counterfeiting USD?

I have had this question for a long time. For example, if I wire 50M USD from China to the US, does the Chinese bank physically deliver 50M USD cash to the US bank? or is it just changing a number in ...
4
votes
1answer
79 views

Fama-French Factors in €

I am having a bit of a problem with currency conversion issues. What I do: I sort European stocks based on their book-to-market ratio, each year I form a portfolio (equal-weight) with the 10 stocks ...
3
votes
4answers
127 views

Difficulty understanding put-call parity for currency options

I am self-studying for an actuarial exam on models for financial economics. I am having difficulty thinking about the put-call parity for currency options, specifically how use the notation. Here is ...
3
votes
3answers
768 views

Optimizing a currency only portfolio with negative weights

I am testing various optimization methods for a currency-only portfolio. I have a vector of expected returns for the major developed currencies vs. the USD each week (based on a proprietary model). I ...
3
votes
2answers
2k views

How do I calculate the PPP adjusted exchange rate between two countries?

I have been trying to calculate the PPP-adjusted EURUSD exchange rate. I am not sure if it is the same as relative PPP, for which I have used this formula: Spot rate at time t = Current spot rate * ((...
3
votes
1answer
496 views

How trading in currency pair works, underlying techniques and mechanisms

I am somewhat experienced in Forex trading, but I have a question which has bothered me for quite some time. If we for instance go back in time four months, to before the beginning of value loss the ...
2
votes
2answers
182 views

Forex trading scenarios - calculating units

I'm trying to build an automated forex trading system and I'm trying to understand how to calculate the number of units I should specify for each trade in different scenarios. Say for example I have ...
2
votes
1answer
80 views

Relationshiop between central bank official currency rates and spot forex

Central banks publish official figures for domestic interest rates, as well as spot currency rates for a few select countries (largest trading partners). To prevent arbitrage, I "expect" that in the ...
2
votes
4answers
187 views

Bond portfolio hedging against currency risk

How do I hedge a bond portfolio against currency risk? Ideally I'm looking for books or other references on this topic.
2
votes
1answer
190 views

Log returns and GARCH models

I try to model currency rates volatility using GARCH models through the RUGARCH package in R. Starting from the observed currency rate series, I compute the log-return through: ...
2
votes
1answer
539 views

annual excess returns from CAPM on monthly total returns

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
2
votes
2answers
73 views

Best practice for international Fama-French analysis

First I have to admit that I have never been really good at thinking about the implications of investments in different currencies. I don't know why but it makes my head spin, this is why I am no FX ...
2
votes
1answer
59 views

Weights in Portfolio Attribution when considering Currency

I'm performing a simple Portfolio attribution with the Brinson 1985 model where returns are decomposed into both an allocation component and a selection. Using the formula, I first did the ...
2
votes
1answer
503 views

How does currency valuation depend on the cash reserve ratio for a country?

Currency valuation (with respect to other currencies) is an important parameter in finance, but how is it related to the cash reserve ratio?
2
votes
2answers
1k views

The Fair Value of Paying in Currency X for Goods Bought in Currency Y

Me and my friends are from Europe, we went to US. At the end of the trip they bought an item worth $USD 100$, but because they were short of money, so I paid for the item first with my own $USD 100$. ...
2
votes
0answers
29 views

What does it mean to change the currency of a spread between bonds from 2 different countries?

On reuters I charted the spread between the 10yr US bond and the 10yr UK bond. It gives the me the option of choosing the currency. For just the standard spread(ie: yield(US)-yield(UK)) you select ...
1
vote
1answer
124 views

Why is Indian rupee is stable against the USD even though most other currencies weakening?

The Indian Rupee (INR) seems fairly stable against the USD (1 USD = 62-64 INR) in the recent times even though most other currencies have weakened against USD, some by 20-30%. Apparently, INR is ...
1
vote
3answers
114 views

Is there a broad currency index just like there is an equity market index?

I would like to assess the performance of currency traders so I was wondering if there is a broad currency index that can be used as a benchmark to assess the performance of these traders. The index ...
1
vote
3answers
44 views

Where can I get json currency data feeds every millisecond?

I have been looking for free or paid json data feeds on currencies for long. I have come across: currencylayer.com Oanda XE The problem is that I really need millisecond based updates. Can ...
1
vote
2answers
77 views

different amount of information on return correlations from shorter and longer periods?

I want to calculate annual excess returns on portfolios using monthly (total) returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on ...
1
vote
1answer
389 views

Blackbox Optimization + Bootstrapping = Parameter Selection?

Most automated trading systems have a number of embedded parameters such as the lookback periods, entry and exit thresholds, etc. This is like the moving average crossover system or any of the systems ...
1
vote
2answers
155 views

what data to use to compare the interest rate among different currencies?

Very new to fixed income signals. I am a little confused about which data to use to compare interest rate among different currencies. For example, I am interested in compare interest rate in the ...
1
vote
1answer
118 views

Analysing FX Data

When analysing currencies, the data always comes in pairs so it is hard to normalise a multivariate time series of data e.g. if I have GBPvsUSD, EURvsUSD and CADvsUSD then changes in the US economy ...
1
vote
1answer
122 views

right benchmark for an incompletely diversified international portfolio (for a CAPM): MSCI World or MSCI ACWI IMI?

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
1
vote
1answer
2k views

how to chain monthly excess returns into annual?

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
1
vote
1answer
580 views

Arbitrage between markets

I'm trying to understand how arbitrage works, but I'm having some difficulties based on some restrictions: I have markets A, B and C. The currencies that are traded are X <-> Y, and X <-> Z. ...
1
vote
0answers
31 views

calculating long short portfolios currency exposure

I have calculated the currency exposures of a long short portfolio simply by summing the weights of each stock. However I was told that I need to incorporate the dollar borrowing (short dollars), I ...
1
vote
0answers
40 views

How should I use central banks rates in order to compute 2-day forward exchange rate on EURUSD

Good morning, I would like to compute a 2-day forward exchange rate on EURUSD. For that, I have historical data on EURUSD spot price, and I know that theoretically, when maturity is T we have : $F_0$...
0
votes
1answer
914 views

Japan day count conventions

I am after a good comprehensive resource on Japanese day count conventions. By that I mean, is actual/360 or actual/365 used for pricing various options, forwards, futures, etc.
0
votes
2answers
156 views

How to handle currency change in exchange rate volatility measurement

I am trying to measure exchange rate volatility in some countries and I am using their currencies against euro. Problem is that one of them is Slovakia which has changed the currency in 2009 from ...
0
votes
3answers
93 views

What is meant by “position at a given time” in the context of a series of forex trades?

Suppose you are only talking about a single currency pair, say EUR/USD. Throughout some period of time, you engage in trades with various other parties, sometimes buying, sometimes selling. The rates ...
0
votes
1answer
1k views

How to adjust local currency returns to US$/EUR return?

Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ...
0
votes
1answer
102 views

How to work out the forward outright price from the bid/ask quotes?

I'm facing this problem: Spot AUD/USD is quoted at 0.7634/39; six-months swaps are 112.1/111.1; at what forward outright rate can a price taker sell USD value spot/6 months? On the spot side,...
0
votes
2answers
40 views

Portfolio Theory: Must VarCovar Matrix be based on return var/covar?

I am trying to estimate the minimum variance portfolio where the assets are currency derivatives. In the specific case it does not make sense to base correlations or variance on asset returns. I am ...
0
votes
2answers
76 views

Calculating units in a cross currency short trade

If I have a forex account with a broker and a balance of 100 USD, and I'd like to short EUR/JPY, how many units can I short? How is this calculated? Which currency pair do I use to translate between ...
0
votes
1answer
128 views

Yahoo currency api

I've had a currency widget made for me which is based on http://query.yahooapis.com/v1/public/yql?q=select I am wondering if I can use it on my site, which even though it not more than a hobby could ...
0
votes
1answer
51 views

Currency Portfolio G10 vs USD allocation

Given that I have fundamental data such as GDP growth rate for G10 countries .Now I want to build a currency pairs portfolio of G10 currencies vs USD .How can I translate country scores to currency ...
0
votes
0answers
18 views

What is “swap rate differentials” in relation to currency exchange?

So I'm working on a excel spreadsheet that relates relevant drivers for the FX market. In particular, I was told to look into swap rate differentials. I've read that the interest rate differential is ...
0
votes
0answers
23 views

How to get currency denomination of security from yahoo finance API

I'm trying to write a portfolio program and it would be nice if it could auto detect what the currency denomination of the ticker is without needing user input.
0
votes
0answers
43 views

Trades Question

Two very specific questions (they are more database questions, but need specific knowledge): A same stock could be traded in different currencies in a same exchange? A bond is always traded in his ...