Related papers: Triangular arbitrage as an interaction among forei…
In this article, we investigate whether exchange rate risk is priced. We use a multivariate GARCH-in-Mean specification and test alternative conditional international CAPM versions. Our results support strongly the international…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
Reinforcement learning can interact with the environment and is suitable for applications in decision control systems. Therefore, we used the reinforcement learning method to establish a foreign exchange transaction, avoiding the…
This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
We consider a central bank strategy for maintaining a two-sided currency target zone, in which an exchange rate of two currencies is forced to stay between two thresholds. To keep the exchange rate from breaking the prescribed barriers, the…
Recent experiments on semiconductor quantum dots have demonstrated the ability to utilize a large quantum dot to mediate superexchange interactions and generate entanglement between distant spins. This opens up a possible mechanism for…
Residual coherence is a graphical tool for selecting potential second-order interaction terms as functions of a single time series and its lags. This paper extends the notion of residual coherence to account for interaction terms of…
We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…
We consider a financial market with zero-coupon bonds that are exposed to credit and liquidity risk. We revisit the famous Jarrow & Turnbull setting in order to account for these two intricately intertwined risk types. We utilise the…
We develop the optimal trading strategy for a foreign exchange (FX) broker who must liquidate a large position in an illiquid currency pair. To maximize revenues, the broker considers trading in a currency triplet which consists of the…
This paper presents the way in which can be determined the exchange rates that simultaneously balance the trade balances of all countries that trade with each other within a common market. A mathematical synthesis between the theory of…
We calibrate and test various variants of field theory models of the interest rate with data from eurodollars futures. A model based on a simple psychological factor are seen to provide the best fit to the market. We make a model…
In this paper, we introduce a matrix-valued time series model for foreign exchange market. We then formulate trading matrices, foreign exchange options and return options (matrices), as well as on-line portfolio strategies. Moreover, we…
The definition of time is still an open question when one deals with high frequency time series. If time is simply the calendar time, prices can be modeled as continuous random processes and values resulting from transactions or given…
The complexity and ambiguity of financial and economic systems, along with frequent changes in the economic environment, have made it difficult to make precise predictions that are supported by theory-consistent explanations. Interpreting…
This paper proposes two numerical solution based on Product Optimal Quantization for the pricing of Foreign Echange (FX) linked long term Bermudan options e.g. Bermudan Power Reverse Dual Currency options, where we take into account…
We show that time-dependent fluctuations $\{\Delta x\}$ in foreign exchange rates are accurately described by a random walk in a complex plane that is demarcated into the gain (+) and loss (-) sectors. $\{\Delta x\}$ is the outcome of $N$…
We analyze high-resolution foreign exchange data consisting of 20 million data points of USD-JPY for 13 years to report firm statistical laws in distributions and correlations of exchange rate fluctuations. A conditional probability density…
We analyze the multifractal spectra of daily foreign exchange rates for Japan, Hong-Kong, Korea, and Thailand with respect to the United States Dollar from 1991 to 2005. We find that the return time series show multifractal spectrum…