Safe-Haven Currency and Sequence Risk: A State-Dependent Swiss Franc Overlay for Global Portfolios

Elias Rubenstein

MPRA Paper from University Library of Munich, Germany

Abstract: Sequence-of-returns risk (SoRR) matters because the order of returns—rather than only their long-run average—determines whether real, inflation-indexed withdrawal plans survive the early retirement years. For EUR/JPY spenders invested in globally diversified, USD-centric portfolios, SoRR is co-determined by market and FX paths in the spending currency. This paper proposes a state-dependent Swiss-franc (CHF) overlay—implemented via cash/bills or liquid FX instruments—as crisis insurance rather than generic hedging. A transparent stress score triggers and sizes the sleeve; outcomes are evaluated on sequence-sensitive metrics (e.g., CVaR(95), maximum drawdown, time-underwater, and the 5th percentile of sustainable withdrawals). Indexing and FX procedures follow MSCI and WM/Refinitiv methodology; the design is fully auditable and modular for empirical tables/figures.

Keywords: sequence-of-returns risk; safe-haven currency; Swiss franc (CHF); currency overlay; FX hedge; regime switching; drawdown management; decumulation; retirement income; CVaR; global multi-asset portfolios; international finance (search for similar items in EconPapers)
JEL-codes: C58 E44 G11 G12 G15 G17 G31 (search for similar items in EconPapers)
Date: 2025-11-02
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:126680

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