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If I have understood your question correctly, no adjustment is necessary if you are using log-returns. Returns of a stock in a differing numeraire is simply a sum of the currency spot process and the locally denominated process. Since you are trying to find the principal components, well, a linear term like this doesn't matter, since that variation will be ...


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Similar to dm63's answer: if you are the fixed payer in the swap: add a long fixed rate bond with coupon equal to the fixed rate and notional equal to the notional of the swap. add a short Floater with the coupons linked to the floating rate of the swap. The notional is the same as of the fixed rate bond. DV01, duration, risk should all be well captures ...


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Ideally you would like to look at both the global backtested period and sub-periods as well, there is nothing wrong with that. No backtesting framework is perfect and no risk ex-ante estimate is perfect either. So you can look at the results over the global period, which conclude that your approach is decent, and then highlight that it particularly didn't ...



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