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A Matrix Approach to Asset Pricing in Foreign Exchange Market

Ming Ma
School of Management and Economics, Beijing Institute of Technology

July 2006

Abstract:
The foreign exchange quotes can be arranged as a symmetry reciprocal positive matrix, it has specific economic meanings: the largest eigenvalue is an indicator of the absence of arbitrage, and the corresponding eigenvector means an instantaneous equilibrium price vector of virtual gold pars which constitutes an arbitrage free matrix of exchange rate. Through transformation of relative prices, arbitrage paths will show up.

Keywords: Matrix analysis, Foreign Exchange, Asset Pricing

JEL Classifications: G12, G15, F31, C02

Working Paper Series

Date posted: October 25, 2006 ; Last revised: February 22, 2008

Suggested Citation

Ma, Ming, A Matrix Approach to Asset Pricing in Foreign Exchange Market (July 2006). Available at SSRN: http://ssrn.com/abstract=921755

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Contact Information

Ming Ma (Contact Author)

School of Management and Economics, Beijing Institute of Technology ( email )

Beijing, Beijing 100081
China

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