# Tag Info

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There was a proxy called the ECU. You should be able to use the weights on the Wikipedia page to get a time series back to 1979. Alternatively, the St. Louis FRED also provides this time series.

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In 1945 at Bretton Woods, the war-time allies agreed on an international gold standard to stabilise the world's economy. Gold was fixed at \$35 / ounce and all other currencies were pegged to that price via the US dollar. The US became the reserve currency of the world. The problems for the US began immediately. In order to ensure liquidity – an ... 3 Check out: "Universal hedging: Optimizing currency risk and reward in international equity portfolios," Fischer Black - Financial Analysts Journal, 1989. as well as many of the subsequent research that references this article (via Google Scholar, for instance). Good luck. 2 Amirsani, Here couple points how I would proceed: I would first look to divide your time series into different clusters, enough so that different market dynamics fall into different clusters. I guess you will not be trading a single asset and thus you will not just optimize over a single stock or options contract. I would strongly try to discourage from ... 2 You are not doing anything wrong. You just need to multiply the absolute return by the currency conversion factor. Example: You trade 200,000,000 yen notional and generate a return of 16% on that notional, then simply multiply 32,000,000 jpy gain by your conversion factor 0.0126 to yield a return of 403,200 USD. The return of 16% was generated on the ... 2 first of all, there is nothing wrong in a currency-only portfolio to be dollar long and short the cross currencies. If that is what your model predicts and if you have a high confidence in the predictions and standard error being low then why do you have issues being dollar long and short the other currencies? You can implement boundary conditions, such as ... 2 A partial answer… For Black-Litterman, an equilibrium no arbitrage condition such as interest rate parity suggests investors would be indifferent between investing in either the foreign or domestic currency. Thus, you could use a constant zero return for all currencies in your opportunity set as the equilibrium model. What this ultimately would do is act ... 2 From a practical standpoint, the conversion rate can be kept constant during the day. It won't be precise, but it'll be fast. Stat arb backtesters have plenty of precedent where the entry price is the day's close plus a slippage factor. So if your goal is adversarial research (where there question is "would this strategy work?"), then you could add a ... 2 There are two factors here, which might or might not be conflicting. 1) You want to mimic what will happen in production. If your production system sweeps currencies once a day, then backtest that way. If your clearing broker only calculates margin at the end of the day, then do the same in backtests. If you will only resize your portfolio once a month, ... 1 The best approximation of EUR/USD crossrate is probably Deutsche Mark - USD. However you need to be careful for the period around the creation of the Euro: due to the exchange rate mechanism European currency rates aren't really fully market-based. I assume you are aware of the Bretton woods system so won't talk about caveats in using currency data too far ... 1 Compounding the monthly excess returns won't provide the annual excess return. You need to compute the difference between the annual return of the portfolio and the annual return of the benchmark. To illustrate this let's look at an example. Consider the following two situations: The benchmark performs well with a$2\%$return each month; The benchmark ... 1 This is actually a stylized example of the classic dual-listed companies "arbitrage", the most famous example of which is Royal Dutch Shell. It is not a pure arbitrage, but rather is a case of "statistical arbitrage", specifically pairs trading. First, express the prices of Y and Z in terms of X, and let's rename X "\$" for convenience's sake. Then Y ...

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Here's a little bit of everything. 1) Some papers on foreign reserves that are used to defend a country's currency, and the flexibility of their exchange rate: http://www.imf.org/external/pubs/ft/wp/2001/wp0118.pdf http://www.eusanz.org/pdf/conf04/choi_baek.pdf 2) Some papers on generic modeling of exchange rates: ...

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Not realy a quant question but funny though, Here are my two euro-cents, I would say that you should ask them for 100-USD times the exchange rate at the date you lend them, plus the interest rates amount that can be calculated by compounding EUR EONIA rate on the period you lend them that money. Regards

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