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Main characteristics

Bloomberg Code SGIFXC10
Inception Date 28/06/2011
Return Type Excess Return
Currency USD
CALCULATED_BY S&P Dow Jones

Objective

The SGI FX - G10 Carry Trade Index (the Index) began publishing on June 28, 2011 and seeks to extract yield from interest rate spreads between currencies, while controlling FX risk based on volatility measures. The Index provides a risk weighted allocation between 9 G10 currency pairs and provides leverage in order to limit the drawdowns generated by cyclical FX crises.

Mechanism

The Index attempts to extract yield from interest rate spreads between G10 currencies by providing a risk weighted allocation, rebalanced on a daily basis. The relative weights of each of the currency pairs are determined according to the Forward Sharpe Ratio, with the highest relative weight given to the currency pair with the highest Forward Sharpe Ratio.
 
Forward Sharpe Ratio is the expected return generated by the interest rate spread (known at inception), divided by the 1W ATM implied volatility.
 
Once the relative allocation is provided, the global exposure of the Index to the underlying FX positions is systematically adjusted according to a predefined risk budget based on 1W FX volatility of each currency pair. A volatility target mechanism is also applied to the Index in order to keep the realized volatility of the Index close to a pre-defined target volatility level of 6%.


The SGI FX-G10 Carry Trade (The “Index”) is the property of SG, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) (“S&P Dow Jones Indices”) to maintain and calculate the Index. S&P® is a registered trademarks of Standard & Poor’s Financial Services LLC (“SPFS”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and these trademarks have been licensed to S&P Dow Jones Indices. “Calculated by S&P Dow Jones Indices Custom” and its related stylized mark(s) are service marks of S&P Dow Jones Indices and have been sublicensed for certain purposes by SG. Neither S&P Dow Jones Indices, SPFS, Dow Jones nor any of their affiliates shall be liable for any errors or omissions in calculating the Index.
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