U.S. Federal Reserve rates: 0.25%
FXCM currently pays 1.35% or $0.37 per day per $10,000 contract.
My goal is to find a currency that will effectivly hedge away price depreciation (and appreciation) risk while earning a fair amount of carry. 1.35% does not sound like alot initially, but at 200 times leverage, it is significant.
I've identified three variables that together explain over 91% of the AUD/USD movement. They are the CAD/USD pair, the AAA corporate risk premium, and the VIX. The AUD/USD is negativley correlated to each of these variables. That is, if one goes up, the AUD/USD should fall.
The regression equation for the AUD/USD is as follows:
AUD/USD = 1.8306 -0.8354CADUSD -0.059AAARP -0.0006VIX
Comparing Prices
Comparing Periodic Returns
6 month rolling correlation AUD/USD, CAD/USD: -0.94
AUD/USD and the VIX
AAA Corporate Bond Risk Premiums
AAA Risk Premiums as functions of CAD/USD and AUD/USD
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