Dr. Jurij-Andrei Reichenecker, LL.M.
Current Position
Markt Risk Analyst for Liquidity Buffers / Treasury Assets at UBS
Visiting Researcher at University of Strathclyde
Profile
Education
BSc in Mathematics and Mangement
MSc in Quantitative Finance
PhD in Business Economics with focus on international portfolio management and currency strategies
LL.M. in Banking and Financial Markt Law (ongoing)
Research Interest
Bond liquidity measurement (ongoing academic project)
Bond portfolio optimization (ongoing academic project)
International Portfolio Management
Currency Management
Academic (Published) Projects
Legal Constrains of Smart Contracts in the Context of the Article 104 CRR
Abstract: The 2007 Global Financial Crisis revealed material weakness in the boundary between trading and banking books. Consequently, this boundary was revised by the Basel Committee, leading to an amendment to the Capital Requirement Regulation. Smart contracts can be applied diversely, including to assign positions to a trading or banking book. However, legal constraints could limit the smart contract utilization for this purpose.
Assuming a European standalone institution, two main legal constraints can be identified in the application of smart contracts. First, legal definitions and requirements are mostly qualitative in nature. This means that a smart contract cannot perform a certain justification, as it requires a quantitative interpretation. Second, certain governance processes and risk management reviews are complex and highly economic, demanding a high cognitive ability. A smart contract is therefore limited in its ability to tackle the required exercises, being able to only support these processes and reviews.
Co-Authors
Single author paper
Articles published at
Parametric Currency Overlay: Hedging with an Edge
Abstract: We propose an optimal currency hedging strategy for global equity investors using currency value, carry, and momentum to proxy for expected currency returns. A benchmark risk constraint ensures the overlay closely mimics a fully hedged portfolio. We compare this with naïve and alternative hedges in a demanding out-of-sample test, with transaction and rebalancing costs and margin requirements. Other hedging methods generally reduce risk but at a cost. Some tend to short currencies with high returns and all incur substantial costs with frictions, mostly margin requirements and equity rebalancing costs. The proposed strategy uses predictable returns to reduce this cost. It produces a statistically significant 17% gain in Sharpe ratio and an annualized Jensen-α of 0.93% versus a fully hedged benchmark. Notably, most of the implementation costs of the strategy would be incurred by the benchmark anyway. This reduces its marginal cost and highlights a specific synergy of integrating hedging with speculation.
Article publish at
Diversification effect of standard and optimized carry trades
Abstract: Standard carry trades, which consist of purchasing high- and selling low-yield currencies, provide an economic diversification effect. However, the diversification effect is not robust, and is not borne out by much statistical evidence. We introduce optimized carry trades, which incorporate risk components such as currency volatility or currency skewness in the selection process. These optimized carry trades provide a robust economic diversification effect observed by a larger Sharpe ratio, a reduced portfolio volatility, a smaller drawdown, or a reduced tail risk with respect to a benchmark portfolio. Moreover, a significant improvement of the mean-efficient frontier is observable, with the result that minimum-variance and tangency portfolio are enhanced. The empirical results reveal that optimized carry trades have a larger diversification effect than standard carry trades and their modifications.
Co-Authors
Single author paper
Articles published at
Standard and optimized carry trades
Abstract: Drawdown periods of standard carry trades are primarily the result of losses in classic carry trade currencies. These periods coincide with an increased financial stress, such as the recent financial crisis. The introduced optimized carry trades employ a dynamic weighting scheme for currencies, which incorporates general risk components. Optimized carry trades are therefore less exposed to losses under financial stress, and provide an enhanced risk-return profile over the entire and second half of the sample period and during periods of volatile markets. These results find robust statistical evidence. Furthermore, optimized carry trades have a lower correlation with traditional asset classes than standard carry trades. Traditional models of risk are less successful in explaining the returns of optimized carry trades.
Co-Authors
Single author paper