Maraging Partners

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Track Record of the Quarterly FX Forecasts. November 2014.

Since January 2012, we have been publishing quarterly forecasts for EUR/USD, USD/RUB and EUR/RUB and posting them on the web. We will continue doing that, since in our opinion, that's the best way to demonstrate our capabilities to those who have not yet become our clients. In addition to the forecasts which are issued at the beginning of the quarter, we post regular track record updates on the multi-currency portfolio managed on the basis of these forecasts. These updates are issued in the middle of each quarter, and this is the third such update.

The forecasts, starting from the Q2 2012, are formulated in a probabilistic form, so that the information about the expected movement of the FX quote for the quarter, which what the reader is after, is presented as a set of probabilities, which are the estimated probabilities to find the quote at the end of the quarter in each of the four intervals, which would have been equally likely had the price evolution been a random walk with the historically recorded volatility. These probabilities, which are estimated subjectively by analysing various factors responsible for FX market dynamics, constitute the core value of the forecast. This value is subjected to quantitative evaluation in the course of time as reality tests the forecast.

What are the results?

FX Track Record November 2014

The chart above is constructed according to the following rule, which we are going to follow in future.

In the interests of transparency, the FX positions are opened using exchange-traded futures contracts cleared by FORTS (of course, similar results could be achieved using forward contracts or spot FX positions).

The sum total of all positions when opened equals a unit of base currency. (Results do not change much if the base currency is changed. As a base currency, we use US Dollar, in order to simplify comparison with the largest number of other investment products, managers, and asset classes.)

The fraction of total position allocated to each currency pair is proportional to the difference in sum probability between the two right quartiles and two left ones in the forecast table.

Positions are changed once per quarter, at the time given in forecasts (in the table description).

The vertical axis shows the sum total of profit or loss per unit of base currency on the positions already closed, plus the current profit or loss. The profit is not reinvested.

The fluctuations in the chart reflect the currency fluctuations. Any "smoothing" of the fluctuations would require higher frequency of decision-making, which is possible, even though it is not part of this open service.

Past performance does not guarantee future returns.