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Modeling TradersХ Expectations in the FX Market in Terms of Distributions with a Functional Parameter

Author

Listed:
  • Vladimir R. Evstigneev

    (National Research University Higher School of Economics, Moscow 101000, Russia)

Abstract

The paper models a subjective probability density function ascribed to traders in the forex market. The density is obtained simultaneously with its local functional ЗcenterИ, i. e. the value that depends upon the variable and with regard to which central moments are evaluated. Both functions are obtained as solutions to one and the same variational problem. The solution is compatible with some crucial results in behavioral finance. Empirical results concerning the FX market forecasting are obtained and discussed.

Suggested Citation

  • Vladimir R. Evstigneev, 2014. "Modeling TradersХ Expectations in the FX Market in Terms of Distributions with a Functional Parameter," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 25-34, March.
    • Handle: RePEc:fru:finjrn:140103:p:25-34
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    More about this item

    Keywords

    forex market; subjective expectations; behavioral finance; probability density function; calculus of variations;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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