dxFeed Introduces the FX Risk Factor Parity Index™ (PARIS): A Tool for Quantifying Currency Risk Factor Exposure

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Apr 18, 2024, 08:51 ET

NEW YORK, April 18, 2024 /PRNewswire/ -- dxFeed, a leading market data solutions and index management provider for the global financial industry, both traditional and crypto, announces the launch of the dxFeed FX Risk Factor Parity Index™ (Parity of Risk; PARIS), designed to reflect the value of a currency basket equally exposed to three critical risk factors: "carry," "value," and "momentum." Developed using dxFeed's methodology, PARIS offers an approach to currency market analysis and investment strategy optimization.

dxFeed Introduces the FX Risk Factor Parity Index™ (PARIS): A Tool for Quantifying Currency Risk Factor Exposure

In accordance with the latest advancements in relevant academic literature, these risk factors have been strategically selected to capture the essence of currency market dynamics. "Carry" represents the asset's yield, "value" indicates its fundamental price, and "momentum" encapsulates recent price movements and trading behavior. Research indicates that the combined influence of these factors explains a significant proportion of FX rate dynamics, with an average R-squared of up to 60% across currencies.

PARIS is meticulously crafted to ensure optimal exposure and resilience against volatility shocks induced by the three key risk factors. By employing sophisticated optimization techniques, the index weights are calibrated to maintain a balanced and robust currency basket, effectively mitigating risk across various investment styles.

Designed to meet the needs of discerning investment professionals, PARIS offers a unique avenue for tracking the performance of a "safe haven" currency basket. Its emphasis on controllable risk allocation aligns with the preferences of investors seeking stability and consistency in their portfolios.

"dxFeed's Quantitative and Index Management Team performed rigorous research and back-testing in the development of the FX Risk Factor Parity Index. We are delighted to come to the market with a benchmark for risk factor parity optimization in a transparent index for passive investment solutions. The PARIS Index was designed to provide a unique and innovative approach to budgeting a currency basket's risk. This continues dxFeed's commitment to serving investors valuable tools and index solutions to navigate the complexities of the financial market landscape," said Bruce Traan, Global Head of Indices at dxFeed.

You can find more information about dxFeed Indices here.

About dxFeed
dxFeed is a leading market data services provider and calculation agent for the capital markets industry. According to the WatersTechnology IMD & IRD awards honors, it's the Most Innovative Market Data Project. The Sell-Side Technology Awards 2023 named the firm the Best Infrastructure Provider. dxFeed focuses primarily on delivering financial information and services to buy- and sell-side institutions in global markets, both traditional and crypto. That includes brokerages, prop traders, exchanges, individuals (traders, quants, and portfolio managers), and academia (educational institutions and researchers).

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