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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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    Cited by:

    1. Li, Xiaoyue & Uysal, A. Sinem & Mulvey, John M., 2022. "Multi-period portfolio optimization using model predictive control with mean-variance and risk parity frameworks," European Journal of Operational Research, Elsevier, vol. 299(3), pages 1158-1176.
    2. Xiaoyue Li & A. Sinem Uysal & John M. Mulvey, 2021. "Multi-Period Portfolio Optimization using Model Predictive Control with Mean-Variance and Risk Parity Frameworks," Papers 2103.10813, arXiv.org.
    3. Yizhan Shu & Chenyu Yu & John M. Mulvey, 2024. "Dynamic Asset Allocation with Asset-Specific Regime Forecasts," Papers 2406.09578, arXiv.org, revised Aug 2024.
    4. Naumzik, Christof & Feuerriegel, Stefan & Nielsen, Anne Molgaard, 2023. "Data-driven dynamic treatment planning for chronic diseases," European Journal of Operational Research, Elsevier, vol. 305(2), pages 853-867.
    5. Reaz, Md & Mahat, Fauziah & Dahir, Ahmed Mohamed & Sahabuddin, Mohammad & Al Mahi, Abu Saad Md Masnun, 2017. "Exchange rate volatility and financial performance of agriculture firms in Malaysia: An empirical analysis using GARCH, wavelet and system GMM," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(3).

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