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Menampilkan postingan dari Agustus, 2013

Applying Corrective AI to Daily Seasonal Forex Trading

  By Sergei Belov, Ernest Chan, Nahid Jetha, and Akshay Nautiyal     ABSTRACT We applied Corrective AI (Chan, 2022) to a trading model that takes advantage of the intraday seasonality of forex returns. Breedon and Ranaldo (2012)   observed that foreign currencies depreciate vs. the US dollar during their local working hours and appreciate during the local working hours of the US dollar. We first backtested the results of Breedon and Ranaldo on recent EURUSD data from September 2021 to January 2023 and then applied Corrective AI to this trading strategy to achieve a significant increase in performance. Breedon and Ranaldo (2012) described a trading strategy that shorted EURUSD during European working hours (3 AM ET to 9 AM ET, where ET denotes the local time in New York, accounting for daylight savings) and bought EURUSD during US working hours (11 AM ET to 3 PM ET). The rationale is that large-scale institutional buying of the US dollar takes place during European working hours to pa

Guest Post: A qualitative review of VIX F&O pricing and hedging models

By Azouz Gmach VIX Futures & Options are one of the most actively traded index derivatives series on the Chicago Board Options Exchange (CBOE). These derivatives are written on S&P 500 volatility index and their popularity has made volatility a widely accepted asset class for trading, diversifying and hedging instrument since their launch. VIX Futures started trading on March 26 th , 2004 on CFE (CBOE Future Exchange) and VIX Options were introduced on Feb 24 th , 2006. VIX Futures & Options VIX (Volatility Index) or the ‘Fear Index’ is based on the S&P 500 options volatility. Spot VIX can be defined as square root of 30 day variance swap of S&P 500 index (SPX) or in simple terms it is the 30-day average implied volatility of S&P 500 index options. The VIX F&O are based on this spot VIX and is similar to the equity indexes in general modus operandi. But structurally they have far more differences than similarities. While, in case of equity indices (for exam