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Cross-country relative duration strategies with macro factors

Cross-country relative duration strategies take vol-adjusted fixed receiver positions in interest rate swaps of one currency area versus others. Similar to directional IRS strategies, cross-country trading factors can be based on point-in-time indicators of economic developments. The main difference is that cross-country factors are typically related to relative economic performance. This post constructs 12 conceptual macro factors that theoretically should help predict cross-country vol-targeted duration returns. […]