Safe-Haven Currency and Sequence Risk: A State-Dependent Swiss Franc Overlay for Global Portfolios

Rubenstein, Elias (2025): Safe-Haven Currency and Sequence Risk: A State-Dependent Swiss Franc Overlay for Global Portfolios.

Abstract

Sequence-of-returns risk (SoRR) matters because the order of returns—rather than only their long-run average—determines whether real, inflation-indexed withdrawal plans survive the early retirement years. For EUR/JPY spenders invested in globally diversified, USD-centric portfolios, SoRR is co-determined by market and FX paths in the spending currency. This paper proposes a state-dependent Swiss-franc (CHF) overlay—implemented via cash/bills or liquid FX instruments—as crisis insurance rather than generic hedging. A transparent stress score triggers and sizes the sleeve; outcomes are evaluated on sequence-sensitive metrics (e.g., CVaR(95), maximum drawdown, time-underwater, and the 5th percentile of sustainable withdrawals). Indexing and FX procedures follow MSCI and WM/Refinitiv methodology; the design is fully auditable and modular for empirical tables/figures.

• Item Type: MPRA Paper
• Language: English
• Keywords: sequence-of-returns risk; safe-haven currency; Swiss franc (CHF); currency overlay; FX hedge; regime switching; drawdown management; decumulation; retirement income; CVaR; global multi-asset portfolios; international finance
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity

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