Premium
Profit Multiplier in Covered Currency Trading with Leverage
Author(s) -
Ghosh Dilip K.
Publication year - 1997
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1997.tb00431.x
Subject(s) - currency , leverage (statistics) , arbitrage , foreign exchange swap , business , profit (economics) , monetary economics , foreign exchange market , trading strategy , algorithmic trading , financial economics , economics , microeconomics , computer science , machine learning
Currency trading, fully hedged with forward contracts and propelled by leverage, is enunciated within a microstructure of trade in foreign exchange with real‐time data from Reuters data banks, and verified with banks and exchange dealers, first without and then with transactions costs. It is shown that iterative trading operations compound net profits significantly, and the existing academic maxim on arbitrage is thus raised to a new height—both in terms of theory and practice.