套利外汇交易-英文版交易指南.pptx

,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,4/2/2009,#,Carry Trade,FNCE 102 Project Assignment 4,Charlene Ting|Foo Chia Ying|Liu Shuang|Mervin Yeo|Thaddeus Low(G3),Carry Trade,Sells,a,currency,with a,lower,interest rate and uses the funds to purchasea differentcurrency yielding a higher interest,rate,A,ttempts,to capture the difference between the,rates,Receives,a double,pay-off from:,Interest,rate difference,Purchased,currencys appreciation against the sold,currency,Carry Trade Risks,Uncertainty,of exchange,rates,Exchange,rates may change,such that investor has to,pay back more expensive currency with less valuable,currency,Transactions,are generally done with a lot of,leverage,Small,movement in exchange rates can result inhuge losses unless hedged appropriately,Uncovered Interest Rate Parity,According,to uncovered interest rate parity,carry trades should not yield a predictable profit,Difference,in interest rates,should,equal the rate at,which,low-interest-rate currency,rises,against the high-interest-rate,one,Others argue that carry trade weakens borrowed currency,because investors,sell,and convert,it to,other,currencies,Investigate if:,Interest,rate parity,holds?,Carry,trades,profitable?,A Good Hedge for Stocks?,Currencies provide portfolios with diversified sources of return if they share,weak correlations to,stock markets,Investigate,Currency,returns of 6 major,currencies:,GBP,AUD,CHF,USD,JPY,EUR,Correlations,against the Singapore stock market returns,Which currency is a,good hedge for Singapore,stocks,Carry Trades,A Singaporean Perspective,Yes!,Use Singapore 1 month BBA rates as benchmark,Comparison against major currencies returns,(1 month BBA rate+Exchange gains/losses),Is Carry Trade Profitable?,Short SGD;Long Foreign,Australia,Euro,Japan,Swiss Francs,UK,US,Sharpe Ratio,2.4331,1.0903,-0.8850,0.0110,2.1578,0.9387,Correlation:FX and BBA,Australia,Euro,Japan,Swiss Francs,UK,US,Correlation between FX&BBA Rates,-0.3043,-0.0771,0.0878,-0.0122,-0.1211,-0.0046,R-Squared,0.0926,0.0059,0.0077,0.0001,0.0147,0.0000,No carry trade but instead parity condition?,Interest Parity Condition?,Slight influence,High interest subject to currency depreciation,Australia;highest r-squared of 9.26%and provides highest BBA rates,Parity places Aussie returns at a detriment?,Highest sharpe ratio of 2.4331,SoIs there carry trade?,Short JPY;Long Foreign,Short JPY;Long Foreign,Australia,Euro,Singapore,Swiss Francs,UK,US,Sharpe Ratio,1.6902,0.7946,-0.0268,-0.0141,1.5000,0.7470,Short SGD;Long Foreign,Australia,Euro,Japan,Swiss Francs,UK,US,Sharpe Ratio,2.4331,1.0903,-0.8850,0.0110,2.1578,0.9387,Influence of carry trade?,Different degree of influence during different economic phases,Based on data,carry trade is minimal,However,better off shorting SGD and long high interest currencies,Indicated through sharpe ratio,Explanation of BBA rates and Exchange movements,Overview,Market consist of many participants,Exchange and BBA rates explained through fundamentals,Model Observations,Carry trade stands,Spike in SG BBA rates,SGD will strengthen against UK,EURO&US,Why?,UK,EURO major currencies that have highest trading volume,And also,Model Observations,Model Observations,Y=C+G+I+(X-N),Y=Gross Domestic Product(GDP),C=Consumer Price Index(CPI),G=Government(not considering this),I=BBA Rates,(X-N)=net of exports,2 Phase Analysis-Singapore,1,st,phase:1999 to 2003,Down-trend for BBA rates,Depreciation in SGD,43.15%explained by carry trade,Net of export&SG movements,Explains 27.12%of variance with a correlation of 0.5208,Depreciation in SGD to push exports,Recession,1,st,phase:1999 to 2003,CPI affects BBA rates,Reduce rates to fuel growth,Correlation of 0.6641,explain 44%of relationship,2 Phase Analysis-Singapore,2,nd,Phase 2004 to 2008,Carry trade does not support!,Positive correlation of 0.3482,which explains the relationship by 12.13%,BBA rates down,SGD appreciate?,Investors trading on FUNDAMENTALS!,Spike in net exports,More demand from foreign importers,Explains 47.43%on the SGD appreciation,2,nd,Phase 2004 to 2008,Instead of increasing rates to curb inflation,MAS used SGD appreciation.,Thus,CPI and BBA did not move in tandem,SGD appreciation&CPI,Negative correlation of-0.729;explains 53.18%of relationship,CPI increase,SGD appreciate,Findings,What affects market in the past,may not,affect market now,Carry trade works in 1,st,phase;profitable,Essentially,Exchange and BBA rates movements relies on,FUNDAMENTALS!,Which currency is the best hedge against MSCI Singapore?,Top 3 basket,-Based on Correlation,Swiss Francs(CFH),Japanese Yen(JPY),Euro,Comparison&Advice,Return:,SGX($1,040),Euros($19,907),Swiss Francs($8,989),Japanese Yen($1,523),Risk:,Swiss Francs,Japanese Yen,Euros,Hedging Analysis,A good hedge instrument generally has inverse correlation to underlying investment,Economic Phase,SG Boom Period,(2003-2006),SG Recession Period,(1999-2002),CHF Loss of$4,461.66,Yens Loss$20,536.14,Euro Gain of$33,157.28,CHF Gain of$41,011.96,Yens gain of$2,939.11,Euro Gain of$77,452.75,Combined Returns,Euro-$110,610Correlation-0.24,CHF-$39,550 Correlation-0.41,JPY negative$17,597Correlation-0.30,Is Euro The Best Hedge?,Recession(SG),Boom(SG),Boom(SG),Recession(SG),Fx,Returns,MSCI gains,Euro,JPY,CHF,1999,3.2462,-0.6926,0.5626,-0.6014,2000,-1.2134,-0.0978,-0.3502,0.1625,2001,-0.9521,0.0449,-0.3483,0.1611,2002,-0.9360,0.5437,0.2089,0.6379,2003,1.3152,0.7631,0.4037,0.4988,2004,0.6422,0.1802,0.0124,0.2355,2005,0.5837,-0.5298,-0.5517,-0.5545,2006,1.3331,0.1370,-0.3856,-0.0130,2007,0.8382,0.1870,0.0179,0.0660,2008,-2.7537,-0.1893,1.0114,0.2526,Correlation to MSCI,Recession,-0.82,-0.88,R square,0.67,0.78,Boom,0.70,0.55,R square,0.50,0.30,CHF or Euro?,Investors,intentions and his risk aversion.,Future Outlook,Future Outlook,Future Outlook,To determine best hedge for Singapore stocks in the future,GDP Model,Forecast figures(CPI&X-N)from EIU,BBA SG was forecast:,Obtain forecast deposit interest rates from EIU,Calculate%change for each year,%change multiplied to base of previous years BBA SG,Future Outlook,Year 2009,CPI&(X-N)downward trend,Similar to 1999 2003 period,SGD likely to depreciate,Recession,2010 Onwards,CPI,I&(X-N)upward trend,Similar to 2003 2006 period,SGD likely to appreciate,Growing economy,Future Outlook,In the long run,Singapores economy heading towards a boom,Between Euro&CHF,Currency of best hedge:Euro,Future Outlook,Reasons in selecting Euro,Best hedge is determined based on currency that provides best gain in a recession,During Boom,Euro gains while CHF losses,SG Boom Period,(2003-2006),SG Recession Period,(1999-2002),CHF,Loss,of$4,461.66,Euro,Gain,of$33,157.28,CHF Gain of$41,011.96,Euro Gain of$77,452.75,Question&Answer,Thanks for your time and attention!,