A NETWORK MODEL FOR FOREIGN EXCHANGE ARBITRAGE, HEDGING AND SPECULATION

C. Kenneth Jones

International Journal of Theoretical and Applied Finance (IJTAF), 2001, vol. 04, issue 06, 837-852

Abstract: This paper presents alternative approach to foreign exchange market trading decisions. The model is equally applicable to the arbitrage practices of international banks, to the hedging decisions of multinational corporations, to the investment decisions of currency fund managers and to the uncovered positions of currency speculators. By using a network model to represent these situations complex problems can be modeled and the optimization problem required to maximize profit or eliminate risk can be accurately formulated.

Keywords: Covered interest arbitrage; foreign exchange hedging; foreign exchange speculation; network models (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1142/S0219024901001279

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