Immunization open position


The idea of immunization open position in the financial market has led to the evolution of the quality of the bond portfolio management techniques - significantly reduced the risk of a relatively small loss in the yield of the portfolio. This work demonstrates the benefits of immunization with two sub-accounts opened position in the spot market FOREX.

Make a profit from the turmoil of the independent

The concept of vaccination (immunization) is usually associated with the "core" segment of the financial market. [1] This is essentially the technique of portfolio management in the capital market, which allows a trader with a high degree of accuracy to predict their future earnings.

When the portfolio is properly structured, it is "immunized" from the negative side, first of all, on the capital markets associated with fluctuations in interest rates.

To properly analyze the risks associated with open currency position, the trader should take into account the primary and secondary factors affecting its profit (or loss). It usually focuses on the factors that most significantly affect the direction and degree of change in the exchange rate. For a trader with a deep investment horizon (occupying a position more than one day) knowledge of risk is important to the future as well as today. With this information, the trader can immunize its open position (to make a profit independent of unexpected shocks in the market FOREX).

Tactics immunization allows non-linear development of the market. Virtually every segment of the financial market in the relatively shallow depths of investment takes an intermediate position between the possibility of a deterministic prediction of the market and the reigning chaos on it. In this case, our ability to anticipate the course of events in the market are severely limited, and the risk associated with the presence of position, proportional to the square root of the time spent in the market. Despite the randomness of price fluctuations in the market there are repeated combinations, proportions and combinations, which makes their application in practice.

Immunization automatically takes into account changes in trading activity related to volatility, time, trends and cycles of different lengths. During the early diagnosis of errors are inevitable. In order to somehow minimize the losses, and proposed technical and immunization open positions in the market FOREX.

Similar positions in different directions

The basis of the processes of immunization are hedging foreign exchange exposure. Difference from conventional immunization hedging is more complete (close to 100%) protection position at the moment limited predictability of the market and, therefore, the prospect of a more stable income. The simplest method of immunization is the simultaneous opening of two sub-accounts of the same items in different directions. Say, on the first bill trader buys 1 million USD / JPY - and then on the second run sells 1 million USD / JPY. Theoretically, such immunization leads to the trader did not earn, but do not lose. In practice, if we remain in the role of an observer, will be slow, day by day, a decrease in total account for a small percentage of negative delta "overnight" in both sub-accounts (for a long position will be charged less than the deductible with a short position, because you always take a higher percentage than the one under which you can lend in the market FOREX).