Backtesting fx strategy with carry adjustment

[adamscj]

Has anyone got experience of backtesting fx strategies including carry adjustment? I've been playing around with a daily fx strategy that shows potential over the period 2001-2010 and now I'm trying to factor in costs to see if it's really viable.

I've managed to do this for spread/slippage but struggling to work out how I can account for the interest rate differential or carry. Does anyone know where I can get hold of historical interest rates for a range of countries (G10+others) or some kind of carry adjusted fx rates?

Thanks in advance

 

[Martinghoul]

Well, what do you need? I can help you with the data, but you should realise how your "simulated carry" is related to the actual carry (and rollover bid/offer, if any) your broker pays/charges you. One alternative is to do your back-testing on forwards, which are WYSIWYG, but bid/offer is higher. Anyways, send me a PM if you want the data.

 

[Rhody Trader]

Here's something to keep in mind. If you are going both long and short the pair(s) in your testing, and your holding periods are roughly the same for both types of trades, then the carry is going to be pretty close to neutral.

 

[adamscj]

Here's something to keep in mind. If you are going both long and short the pair(s) in your testing, and your holding periods are roughly the same for both types of trades, then the carry is going to be pretty close to neutral.

I an going both long and short although there has generally been a short bias since 2000 due to the depreciation of the Dollar (and I'm trend following). I guess this would be positive for me though as I'm tending to buy EM and sell USD which would give me a positive IR differential