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Dynamic allocations for currency futures under switching regimes signals

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  • Reus, Lorenzo
  • Mulvey, John M.

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.

Suggested Citation

  • Reus, Lorenzo & Mulvey, John M., 2016. "Dynamic allocations for currency futures under switching regimes signals," European Journal of Operational Research, Elsevier, vol. 253(1), pages 85-93.
  • Handle: RePEc:eee:ejores:v:253:y:2016:i:1:p:85-93
    DOI: 10.1016/j.ejor.2016.02.024
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    References listed on IDEAS

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