Dynamic allocations for currency futures under switching regimes signals

Lorenzo Reus and John M. Mulvey

European Journal of Operational Research, 2016, vol. 253, issue 1, 85-93

Abstract: Over the last decades, speculative investors in the FX market have profited in the well known currency carry trade strategy (CT). However, during currencies or global financial crashes, CT produces substantial losses. In this work we present a methodology that enhances CT performance significantly. For our final strategy, constructed backtests show that the mean-semivolatility ratio can be more than doubled with respect to benchmark CT.

Keywords: Investment analysis; Currency futures; Carry trade; Regime identification; Mean-semivariance portfolio optimization (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:253:y:2016:i:1:p:85-93

DOI: 10.1016/j.ejor.2016.02.024

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