The currency trading system with constant magnitude of unitary return

Krzysztof Piasecki , Michał Stasiak


In the article, we consider currency transactions related to the exchange rate given as the quotient of the base currency by the quoted currency. The unitary return is defined as the quotient of return expressed in quoted currency by the quote of base currency. All possible states of the currency market form a finite elemental space of states. All knowledge about the dynamics of the currency market is presented in the form of a prediction table describing the conditional probability distributions of incoming exchange rate changes with a given magnitude of the unitary return. On the other hand, in the proposed trading system each transaction is concluded in such a way that the gross payment is determined by the given magnitude of unitary return. Using the prediction table, we determine the success probabilities for each state of currency market. The set of decision-making premises is defined as the set of all those currency market states, for which the probability of success is greater than the value determined by the investor. The benefits of using the proposed transaction system are assessed using the expected annual payment. The investment risk is determined by means of expected Shannon’s entropy. Both of these indexes can be used to select the optimal trading system.
Author Krzysztof Piasecki (WZ / KIiN)
Krzysztof Piasecki,,
- Department of Investment and Real Estate
, Michał Stasiak (WZ / KIiN)
Michał Stasiak,,
- Department of Investment and Real Estate
Publication size in sheets0.5
Book Szkutnik Włodzimierz, Sączewska-Piotrowska Anna, Hadaś-Dyduch Monika, Acedański Jan (eds.): 10th International Scientific Conference: Analysis of International Relations 2018. Methods and Models of Regional Development. Summer Edition. Conference Proceedings, 2018, Wydawnictwo Uniwersytetu Ekonomicznego w Katowicach, ISBN 978-83-7875-456-5, [978-83-7875-455-8], 145 p.
Keywords in Englishprediction table, currency transactions’ system, expected payment, Shannon’s entropy
Languageen angielski
Score (nominal)20
Score sourcepublisherList
ScoreMinisterial score = 20.0, 24-06-2020, ChapterFromConference
Publication indicators WoS Citations = 1
Citation count*5 (2020-10-26)
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