fintech-algorithms

Currency-Hedged Index

Install and import

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/return-variants/currency-hedged-index";

Signature

calculate(data)

Worked example

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input

data
{
  "baseCurrencyReturns": [0.01202, -0.003004, 0.002982, 0.006008, -0.003997],
  "forwardOffsets": [-0.0018, -0.0009, 0.0027, -0.0036, 0.0009],
  "hedgeRatio": 1,
  "baseLevel": 1000
}

Call

calculate(data)

Returns

object with 4 fields: hedgedReturns, levels, endingLevel, hedgeRatio

{
  "hedgedReturns": [0.01022, -0.003904, 0.005682, 0.002408, -0.003097],
  "levels": [1000, 1010.22, 1006.276101, 1011.993762, 1014.430643, 1011.288951],
  "endingLevel": 1011.288951,
  "hedgeRatio": 1
}

Diagrams

Currency-Hedged Index — article hero
Currency-Hedged Index — failure guard
Currency-Hedged Index — worked example

Calculation flow

Currency-Hedged Index calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Currency-Hedged Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Currency-Hedged Index methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References