The profitability of currency speculation


Journal Article

This paper presents the results of a post-sample simulation of a speculative strategy using a portfolio of foreign currency forward contracts. The main new features of the speculative strategy are (a) the use of Kalman filters to updata the forecasting equation, (b) the allowance for transactions costs and margin requirements and (c) the endogeneous determination of the leveraging of the portfolio. While the forecasting model tended to overestimate profit and underestimate risk, the strategy was still profitable over a three year period and it was possible to reject the hypothesis that the sum of profits was zero. © 1987.

Full Text

Duke Authors

Cited Authors

  • Bilson, JFO; Hsieh, DA

Published Date

  • January 1, 1987

Published In

Volume / Issue

  • 3 / 1

Start / End Page

  • 115 - 130

International Standard Serial Number (ISSN)

  • 0169-2070

Digital Object Identifier (DOI)

  • 10.1016/0169-2070(87)90082-3

Citation Source

  • Scopus