Thursday, November 22, 2012

Does CAPM model make sense for trading systems in the Forex market?

With this question I want to initiate series of reflections about the construction of a separate, not discussed here before, methodology of the speculations on derivatives. The practical realization of this idea, which I will develop in subsequent posts, will be carried out using the methods and achievements of the modern theory of portfolio selection. One of the concepts operating within it is known as CAPM, i.e. Capital Asset Pricing Model. The model mentioned here was originally formulated for equity portfolios, and naturally is followed by the idea - good or bad - to transplant its prey on the ground of derivative instruments, including Forex.