Forex and Crypto Investing: From Theory to Practice · Dr MAI Huu MinhChapter 19 of 22 · Module 5: Products and practice
CHAPTER 19
Building and Back-Testing an FX or Crypto Index
From prices to a rules-based index in Excel and R
Opening question
“Can I build and test a crypto index myself?”
In this chapter
- The data an FX or crypto index needs, and why one exchange price is not enough
- Building a clean daily reference price with a median and simple checks
- Rules for the universe: eligibility, stablecoins, age and liquidity
- Market-cap, equal and capped weights, with a worked capping example
- Chain-linking the index level, rebalancing and trading costs
- A seven-year back-test of the NXW Crypto 10 rules on simulated data
- A compact index engine in R
- Survivorship, look-ahead and delistings, and how to publish a methodology
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 19 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Forex and Crypto Investing: From Theory to Practice (Volume 3, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
19.1 Why build your own index?
19.2 Data: what you need
19.3 Cleaning the prices
19.4 Rules: the universe
19.5 Weights and caps
19.6 Calculating the index
19.7 Back-test: the NXW Crypto 10 rules on simulated data
19.8 The engine in R
19.9 Pitfalls: survivorship, look-ahead and delistings
19.10 Publishing the methodology and governance