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A Framework for the Active Management of a Global Currency Fund

Antonio Marcos Duarte Júnior


We consider the problem of optimally managing an investment fund by taking positions in spot and derivatives foreign exchange markets. The framework proposed combines scenario analysis and downside risk to provide an optimization model more realistic and conceptually superior when compared to previous currency works based on the Markowitz's Mean-Variance framework. A historical simulation covering three years, and involving eleven currencies, is presented to illustrate the potential of the framework. Extensions to cover multiperiod investment analysis are also discussed.


Downside risk; foreign exchange; portfolio management; scenario analysis.

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DOI: http://dx.doi.org/10.12660/bre.v17n21997.2864

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