We’re back to reality in Toronto (though have just recently been informed that there are supposed to be even more significant riots in Montreal on Tuesday and Thursday);
Here’s a look at the hourly P&L of two of our trades. First up is our long Indonesian Rupiah (IDR) and short Japanese Yen (JPY). We began looking at this on the 2nd of March and though it was a bit late, we finally pulled the trigger on the 9th of March and got into two forward agreements to go long $1 MM in Rupiahs and short $1 MM in Yen for a period of two months.
These are the curves that we were quoted on the evening of the 9th:
Our entrance prices were 9151.69 Rp and 82.40 Yen to the USD for an interest carry cost of $1323.59. Notice that we went against the grain on both sides of this trade as the IDR is quoted as weakening and the JPY is quoted as appreciating.
Suffice it to say, the volatility of this trade is pretty shocking. The hourly standard deviation of the Yen leg is $6774; the hourly standard deviation of the Rupiah leg is $2247 (though this is of little comfort as the Rp trading hours are about a third of Yen trading hours). Net this position has an hourly standard deviation of $6959–which is to say that it is both a piss-poor hedge and (with my current P&L sitting around $12000 at the time of writing) there is a 2.2% chance that I could lose all of that over the next hour. A pretty sobering thought. Here’s hoping intuition trumps statistics.