Currency portfolio manager Evaluation

Something I got little stuck with. I do apprentice your input. Lets consider john decided to invest some of his money in FX Derivatives market (leveraged products). John has been approached by 10 traders. All saying we are great. He has received the trading history (transaction by transaction) for the past 12 months. Also, he has the entire price history (minutes by minutes in case he would like to evaluate open position drawdowns during the 12 months period) for all the instruments those managers been trading on. He is now considering: Asses the risk for each money manager and see in which categories they will fall through. i.e. Similar risk to Government bond, corporate bond, 1:1 leverage on purchasing cash EUR/USD, or a risk similar to lottery. Set a score 0-100 for the results that will allow him to select the top three managers with the highest scores. What are the process that john must consider during his assessment and based on what he would be able to give each money manager a score rate out of 100. Samy

Usually, you give 100 to the manager that gives you the biggest kickback.

More seriously, I think you need to explain the context of your problem better, it seems kind of random. Is this a homework assignment

Edit: OK, I think I see what you’re getting at. You want to look at the currency return stream and gauge whether the risk looks more like bond risk, credit risk, regular currency risk, or a lottery-type payout.

For lotteries, you’d want to look for outliers and see if there are any returns that are particularly large. Lotteries would presumably give you a low score.

Then you’d probably want to look at the correlations with standard bond, credit, and currency indexes to see if they are tilted more towards one than the other.

Then you’d probably want to see if the standard deviation (or other risk measure) is closer to bonds, credits, currency, etc… To some extent, this part may not be necessary, because you might lever up (or down) a bond index to try to match whatver the strategy is.

But this does sound like a homework assingment, so perhaps the question is designed to test a principle that was taught recently, and it’s not entirely clear what that principle would be.


Th case is more a real situation than home study.

If John looking to evaluate the invisibility of several portfolio managers and considering the risk. Lets think, we have created a benchmark results similar to this image: Group 1 to be AAA bond with 0.95% one month 95% Var and Group 7 to be the Lottery 98.1% Var. calculating the Min and Max Var similar to the image here: and then identify based on the Risk, within which 7 groups that particular portfolio will fall. samy