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The Forex Trading System for Speculation with Constant Magnitude of Unit Return

Mathematics. 2019;7(7):623 DOI 10.3390/math7070623

 

Journal Homepage

Journal Title: Mathematics

ISSN: 2227-7390 (Online)

Publisher: MDPI AG

LCC Subject Category: Science: Mathematics

Country of publisher: Switzerland

Language of fulltext: English

Full-text formats available: PDF, HTML

 

AUTHORS


Krzysztof Piasecki (Department of Investment and Real Estate, Poznan University of Economics and Business, al. Niepodleglosci 10, 61-875 Poznań, Poland)

Michał Dominik Stasiak (Department of Investment and Real Estate, Poznan University of Economics and Business, al. Niepodleglosci 10, 61-875 Poznań, Poland)

EDITORIAL INFORMATION

Blind peer review

Editorial Board

Instructions for authors

Time From Submission to Publication: 11 weeks

 

Abstract | Full Text

The main purpose of this article is to investigate a speculative trading system with a constant magnitude of return rate. We consider speculative operations related to the exchange rate given as the quotient of the base exchange medium by the quoted currency. An exchange medium is understood as any currency or any precious metal. The unit return is defined as the return expressed in the quoted currency by the amount of base exchange medium. All possible states of the exchange market form a finite elemental space. All knowledge about the dynamics of this market is presented as a prediction table describing the conditional probability distributions of incoming exchange rate changes. On the other hand, in the proposed trading system each speculative operation is concluded in such a way that the gross payment is determined by the given magnitude of unit return. The paper contains an analysis of the following evaluation criteria: annual number of transaction, success probability, expected unit payment, expected unit profit, risk index, unit risk premium, return rate, interest rate, and interest risk premium. Both of these indices can be used to select the effective trading systems. Effectiveness is considered in the local sense and in the global sense.