Profit Multiplier in Covered Currency Trading with Leverage

Dilip K Ghosh

The Financial Review, 1997, vol. 32, issue 2, 391-409

Abstract: 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. Copyright 1997 by MIT Press.

Date: 1997
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