Extreme Value Strategies in the FX-Market

Sammanfattning: The foreign exchange market is known as one of the most efficient markets in the world, has a daily turnover of approximately $1.9 trillion and is open 24 hours a day seven days a week. In difference to what most people believe 80-95% of the market activity is of purely speculative behaviour. In order to speculate in market movements the investor needs to make a prediction of the future spot rate. There are many ways to do this and in this thesis we investigate methods using historical data to make predictions of future values. When using historical data which is sampled we lose information. This information can be partly restored using the high and low price samples. We investigate if it is possible to restore the lost information by using the high and low price samples and construct strategies that use this information to evaluate them against strategies that does not use the information. Our results shows that the extra information can be used to make more profitable strategies.