Tech Report Number
1993-103
Abstract
The apparent persistence of unexploited opportunities for expected profits in foreign exchange markets suggests extremely risk-averse market participants. A foreign exchange trader who faces favorable odds can make the probability of ruin arbitrarily small by betting a sufficiently small fraction of available wealth on each opportunity. The setting of a low value for the maximum acceptable probability of runin then provides a rationale for the trader behaving as if he or she has a high degree of risk aversion.
Keywords
Financial market, Risk
Date of this Version
1-1-1993
COinS