Since 2010, the Fund has had a mandate to trade the spot euro. A new model began trading in August 2012: V3.B. This new model is composed of what’s referred to as the Standard Style Model and the Global Euro Chaos Hedge.
The chaos of the European credit crisis, beginning in 2008 with the collapse of Iceland’s banking system and the U.S. credit crisis, has resulted in divergent euro market scenarios: Consolidation or extremely whippy price action. These situations have created speculative opportunities (see “Profiting from chaos,” below). Initially, to offset negative returns in euro positions, a model was added to trade the Australian dollar in the spring of 2012.
The Standard Style Model trade takes a position in euro and Australian dollar spot markets. We trade a €10,000 spot position with a margin of $300, and an A$13,000 spot position with a margin of $312. All trades are manually executed every four hours, 24 hours a day, Sunday through Friday.