Predictability of currency market exchange

Abstract

We analyze tick data of yen-dollar exchange with a focus on its up and down movement. We show that there exists a rather particular conditional probability structure with such high frequency data. This result provides us with evidence to question one of the basic assumption of the traditional market theory, where such bias in high frequency price movements is regarded as not present. We also construct systematically a random walk model reflecting this probability structure. *

A microscopic model of triangular arbitrage

“…In order to compare it with Fig. 10 quantitatively, we used the time scale T real = 7[sec]; the interval between two consecutive trades in the actual foreign exchange market is, on average, known to be about 7[sec] [27]. The spring constant in the actual market k decays exponentially with the Fig.…”

Stability of Markovian structure observed in high frequency foreign exchange data

“…Recently, Ohira et al (2002) has shown that the naive myth of efficient market hypothesis needs to be reconsidered at tick level. They showed by comparing two sets of data, A and B, which are well separated in time, that many of conditional probabilities for up/down motion take almost the same numerical values in the two data.…”

Analysis of high-resolution foreign exchange data of USD-JPY for 13 years

“…The fat-tail distributions of price fluctuations [1], the diffusions of price [2,3], the correlations of price fluctuations [4,5,6] are well-known characteristics of the open market. However, some of them are not conclusive enough because the terms of data are not long enough.…”