20180306-法国巴黎银行-COMMODITY_QUANT_STRATEGY_20页_649kb

Summary of BNP Paribas Commodity Momentum Strategy (BNPP-TIF)

Core Content

BNP Paribas has introduced a new commodity momentum strategy called BNPP-TIF, which focuses on base metals, gold, and energy commodities. This strategy is based on logistic regression and uses a combination of returns, macroeconomic, and financial indicators to determine the trend of each commodity.

The strategy complements two existing models: MarFA™ (contrarian strategy) and the multi-factor model, offering a trend-following approach that aims to capitalize on strong serial correlation in commodity price returns.

Key Features of BNPP-TIF

• Commodities Included: Gold, WTI Crude Oil, Brent Crude Oil, Copper, Nickel, Zinc, and Aluminium.
• Model Approach: Empirical analysis using a 572-week time window to identify bull and bear cycles for each commodity.
• Trading Rules:
  • Long position if the model's probability of a bull trend is above a defined threshold.
  • Short position if the probability of a bear trend is above a defined threshold.
  • Stop-loss and take-profit levels are set at 5% and 15% respectively.
• Trend Probability Thresholds:
  • Gold: 75% bull, 25% bear
  • Base metals: 60% bull, 40% bear
  • Energy: 67% bull, 33% bear
• Model Update: Updated every Friday with stable coefficients and a 6-month recalibration protocol.
• Strategy Objective: To maximize returns while minimizing transaction costs by focusing on liquid contracts with nearby maturities.

Back-Test Performance

• Annualized Return (2007–2018): 20.5% for the average of the seven commodities.
• Cumulative Return (2007–2018): 224.8% for the portfolio.
• Hit Ratio: 55% for the portfolio, indicating a positive trend-following performance.
• Performance by Commodity:
  • Gold: 73% hit ratio, 214% cumulative PnL, 275% profits vs. 61% losses.
  • WTI Crude Oil: 51% hit ratio, 292% cumulative PnL, 27% annual return.
  • Brent Crude Oil: 51% hit ratio, 163.6% cumulative PnL.
  • Copper: 54% hit ratio, 164% cumulative PnL, 14.9% annual return.
  • Aluminium: 52% hit ratio, 139% cumulative PnL.
  • Nickel: 52% hit ratio, 268.8% cumulative PnL.
  • Zinc: 55% hit ratio, 281.6% cumulative PnL, with the highest average return per trade (3.4%).

Strategic Advantages

• Higher Hit Ratio: Average hit ratio of 55% across all commodities.
• Low Frequency: An average of ~9 trades per year per commodity.
• Outperformance: BNPP-TIF outperforms benchmarks on an individual and portfolio basis.
• Model Output: Provides insights into:
  • The price trend of the asset.
  • The strength of the trend.
  • The probability of trend continuation.
• Scenario Analysis: Enables conditional scenario evaluation, such as the return needed to switch from bear to bull or vice versa.

Model Performance Evaluation

• CAPM Analysis: The model shows a positive market timing coefficient (γ > 0) with statistical significance (p-value = 0.00), suggesting effective trend identification.
• Selectivity Measure (α): Not statistically significant, indicating the model does not foresee undervalued assets.
• Sensitivity (θ): Statistically significant, showing the strategy is responsive to market returns.

Allocation and Strategy Parameters

• Initial Allocation: USD 2mn per asset, totaling USD 14mn.
• Signal Frequency:
  • Gold: 77 trades in 11 years.
  • WTI: ~10 trades per year.
  • Brent: ~9.8 trades per year.
  • Copper: ~8.3 trades per year.
  • Aluminium: ~8.0 trades per year.
  • Nickel: ~11.3 trades per year.
  • Zinc: ~7.5 trades per year.
• Recent Positioning:
  • Gold: Bull trend with 96% probability.
  • WTI: Bull trend with 89% probability.
  • Brent: Bull trend with 70% probability.
  • Copper: Bull trend with 87% probability.
  • Aluminium: Neutral trend with 55% probability.
  • Nickel: Bear trend with 39% probability.
  • Zinc: Bull trend with 74% probability.

Key Information

• Back-Test Period: 2007–2018.
• Performance Metrics:
  • Gold: 5.3% PnL over 3 months, 8.6% over 6 months.
  • WTI: 16.4% PnL over 3 months, 16.4% over 6 months.
  • Brent: 10.0% PnL over 3 months, 25.0% over 6 months.
  • Copper: 3.2% PnL over 3 months, 18.2% over 6 months.
  • Aluminium: -1.7% PnL over 3 months, -8.7% over 6 months.
  • Nickel: -16.6% PnL over 3 months, -22.2% over 6 months.
  • Zinc: 20.6% PnL over 3 months, 35.6% over 6 months.

Future Plans

• The same methodology will be applied to construct momentum strategies for EM FX and credit.
• The strategy is designed to be systematic, data-driven, and aligned with market trends.

Legal Notice

• This document is a marketing communication and not independent research.
• It may be subject to conflicts of interest due to interaction with sales and trading.
• It is not investment research under MiFID II.
• Research content is only available to firms that have signed up for BNP Paribas Global Markets Research packages, or those out of scope of MiFID II unbundling rules.

Contacts

• Robert McAdie: Global Markets Head of Strategy, London, 44 20 7595 8885, robert.mcadie@uk.bnpparibas.com
• Gabriel Gersztein: Commodity Quant Strategy & Head of FX / IR Latam Strategy, São Paulo, 55 11 3841 3421, gabriel.gersztein@br.bnpparibas.com
• Samuel Castro: Commodity Quant Strategy & FX / IR Latam Strategy, São Paulo, 55 11 3841 3492, samuel.castro@br.bnpparibas.com
• Gustavo Mendonca: Commodity Quant Strategy & FX / IR Latam Strategy, São Paulo, 55 11 3841 3445, gustavo.mendonca@br.bnpparibas.com
• Michael Sneyd: Global Head of FX Strategy & Cross-Asset Strategist, London, 44 20 7595 1307, michael.sneyd@uk.bnpbaribas.com

Conclusion

BNPP-TIF is a trend-based commodity strategy that has shown historical profitability, low transaction cost exposure, and effective trend identification. It is designed to be robust, systematic, and adaptable to changing market conditions, with clear parameters and transparent methodology. The strategy is currently in bull trend for most commodities, with Zinc showing the best recent performance.