Discussing the article: "Low-Frequency Quantitative Strategies in MetaTrader 5 (Part 6): A Constant-Dollar Exposure FX Trading System Based on Fixed-Income Interest Rate Yield Differentials"
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Check out the new article: Low-Frequency Quantitative Strategies in MetaTrader 5 (Part 6): A Constant-Dollar Exposure FX Trading System Based on Fixed-Income Interest Rate Yield Differentials.
In 2014, Nicolas Georges, a hedge fund manager, proposed an intraday Forex trading system that does not depend on volume and is intended to work in both trending and ranging markets. Instead of relying on the usual carry-trading logic that uses government sovereign bond yields, he proposed using Interest Rate Swap (IRS) differential momentum to track currency pairs' relative variation. The system was called ANANTA.
The idea was pretty simple: instead of taking the central banks’ monetary policies as the main reference for currency portfolio management, let’s take the market expectations about the economies represented by those central banks. Instead of asking the governments how much interest rate they are willing to pay to finance their debt, let’s ask the people who buy that debt how much interest rate they think the government should offer. What are the commerce, the industry, the hedge fund managers, and other economic agents foreseeing for the economy?
A significant part of these economic agents’ answer is quoted live, all day long, on the interest rate swaps market. The system uses daily updated IRS data feeds to rebalance a portfolio of all G10 currencies plus the Danish krone (DKK).
Author: Jocimar Lopes