Currency Management

Currency Management - Articles & White Papers

Articles and white papers on currency management. This section is for research relating to the theory of currency management, the processes for managing currency risk, and methods of forecasting the currency outlook. A separate section for the current FX market outlook can be found in the "markets outlook" section. The most read reports in this section relate to managing currency exposure, managing currency risk, and the case for hedging foreign investments. The most common risk factors used in currency markets all feature prominently in our research library: the carry factor (interest rate differentials), the momentum factor (trend-following) and the value factor (whether measured by PPP, equilibrium exchange rates, or some other method). The first two have been used successfully in developed markets for many years. Interesting research in this section examines the applicability of these risk factors to emerging markets, and analysis of the currency carry trade for Latin America in particular. In terms of non-currencies discussed in this section, gold has traditionally been the alternative to fiat currencies, but today the cryptocurrency Bitcoin is also jostling for recognition. A number of white papers on Bitcoin appear in this section, examining different aspects to Bitcoin: Bitcoin exchange rates, understanding cryptocurrency, establishing whether Bitcoin is a real currency and how digital currencies can be regulated. This section contains papers of interest to currency managers, asset allocators, multi-currency money managers, global macro managers, multi-asset managers and FX sales.
  • Invesco (Europe)

    Risk and Reward Q3 2017: Multi-factor investing (Invesco)

    This issue of "Risk and Reward" examines multi-asset multi-factor investing. While broad adoption of factor investing is still well in the future, a multi-asset multi-factor strategy permits full utilization of all potential benefits of factor investing, and therefore represents a natural evolution. We also investigate the theoretical and behavioural underpinnings of ...

  • Credit Suisse

    The Future of Monetary Policy (Credit Suisse, 2017)

    This Credit Suisse paper looks at the transformative changes central banks in advanced economies have undergone since 2008. The report concludes that the key issue for decision-makers globally remains to consider which fundamental direction monetary policy ought to take next, assessing two alternative scenarios that may evolve: a return to a pre-crisis "normal", or fiscal dominance.

  • William Blair

    The Case for Macro (William Blair, July 2017)

    Macro investors adopt a top-down view of the world in which they analyze broad trends to allocate risk across asset classes, geographies, sectors, and currencies—resulting in a liquid strategy that aims to deliver strong risk-adjusted returns without having to rely on rising equity or bond markets. In this paper, William Blair's Dynamic Allocation Strategies team ...

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  • Common Risk Factors in Currency Markets (NBER, 2015)

    A 'slope' is a factor relevant to exchange rates. With low interest rates, currencies having a low 'slope' and high interest rate currencies have a 'high slope'. A 'slope' accounts for a great deal of the cross-sectional variation in excess returns, on average. These findings can be replicated with a 2-factor "no-arbitrage" interest rate ...

  • Russell Investments

    Managing currency exposure in Australian superannuation funds

    In the last 10 years, Australian superannuation funds have increased their allocations to overseas assets, introducing greater currency exposure to their portfolios. In this article, Russell's Asia-Pacific CEO shares their insights and experience in managing currency exposures, particularly from the perspective of an Australian superannuation fund.

  • BlackRock

    Getting a Grip on FX: Insights on currency hedging and risk (BlackRock, Sept 2017)

    Currencies can boost returns – but they can also decimate portfolios if their risk is not carefully managed. Investors’ ability to forecast foreign exchange (FX) movements is notoriously limited. Yet ignoring these moves is not an option. The question then: how best to handle them? A selection of BlackRock experts came together to map out their methods of identifying and ...

  • bfinance

    Managing Currency Risk in a Two-Speed World (bfinance, 2017)

    As interest rates in the US and Europe/Japan diverge, today's climate provokes a rethink of historic decisions around currency hedging and currency management. More tactical approaches, including active currency overlays, are experiencing a revival in popularity. Meanwhile, FX management costs face closer scrutiny, with Transaction Cost Analysis coming to the fore. A 'DNA ...

  • FX Global Code 2017: Principles of Good Practice in Foreign Exchange

    This set of global principles of good practice in the foreign exchange market (Global Code) has been developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market (FX Market). It is intended to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of Market ...


    The Carry and Value Pendulum (PIMCO, 2016)

    • 09 Dec 2016
    • Company: PIMCO

    Alternative risk premia portfolios, which typically employ strategies such as carry, value and momentum across asset classes, are growing increasingly popular as investors look to enhance returns and diversification. Here, we focus on carry and value in particular and propose that, rather than treat them as distinct factors, investors should consider them as connected subcomponents ...

  • Country Risk: Determinants, Measures and Implications (Ashwath Damodaran, 2015)

    Ashwath Damodaran is a Professor of Finance at New York University's Stern School of Business. In this paper, he observes that as investors and companies globalize, they are increasingly exposed to new risks. While they may be rewarded with higher returns, they need to clearly understand how best to practically adjust for this additional risk. Damodaran seeks to explain this in ...

  • AQR Capital Management

    A Century of Evidence on Trend-Following Investing (2012)

    We study the performance of trend-following investing across global markets since 1903, extending the existing evidence by more than 80 years. We find that trend-following has delivered strong positive returns and realized a low correlation to traditional asset classes each decade for more than a century. We analyze trend-following returns through various economic environments and ...

  • The Golden Dilemma - investing in Gold (2013)

    Gold, for many investors, has only recently become a viable tradable asset despite having been described as the "golden constant” and used as an inflation hedge for thousands of years. The real price of gold is high, historically, so care should be taken. The price of gold in the past gold real returns have been below average when the real price of gold was in fact above ...

  • A New Look at Currency Investing (2012)

    The rationale for currency investing is examined in this book. The authors draw attention to various features of currency returns that make them attractive to institutional investors. The authors employ style factors to model returns, providing a natural decomposition into alpha and beta components, finding that a number of established currency trading strategies that produce ...