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When RSI met the Binomial-Tree

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Author Info
Rodrigo Alfaro
Andrés Sagner

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Abstract

In this paper we provide a useful method to forecast one the most popular technical analysis tool: the Relative Strength Index (RSI). This method is based on the assumption that stock price can be characterized by the standard binomial model widely used for pricing option. The algorithm is as simple as to code a standard European option. An empirical application to the exchange rate chilean peso and dollar is provided. The results show that the proposed method is superior to the usual ARMA modeling.

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Publisher Info
Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 520.

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Date of creation: Jun 2009
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Handle: RePEc:chb:bcchwp:520

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This page was last updated on 2009-12-2.

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