Investment strategies on financial markets

Abstract

Background. Modern financial instruments (including such exotic ones as options and futures) are not a highly specialized traders tool, but an important component of risk management due to volatility and global competition. Methods of capital management, emerging from the theory of games, are actively used on all levels of the global financial system to solve new issues related to the emergence of new types of financial instruments and macroeconomic conditions. So it is possible to include the choice of shares in investing based not only on the volume of residual capital, but also on the share of the increased to unresolved problems.
The analysis of recent studies and publications has shown that there are insufficiently studied features of the use of capital management methods in both traditional and modern financial instruments markets, provided that profits are reinvested, even if there are significant scientific developments.
The aim of the paper is to summarize modern trends and peculiarities of the use of capital management methods in highly risky financial markets in conditions of reinvestment; to analyze the effectiveness of trading strategies with an alternative choice of optimal share of capital and its derivatives.
Material and methods. In the processЗof research, comparative methods, probability theory and mathematical statistics were used.
Results. An analysis of modern trends in capital management in financial markets in conditions of profit reinvestment is carried out. Based on Kelly's criterion, the model of capital evolution with reinvestment in the markets of binary options for parallel investment strategies is investigated optimizing the share of available and expected capital. A simple correlation for optimal particles due to the geometric (relational) expectation of capital growth and the limited relative variance as a multiplicative counterpart of risk has been obtained. The equivalence of these strategies is shown, some important price ranges with a model example built on PC are analyzed. The peculiarities of the use of capital management methods in financial markets are analyzed compared with traditional ones such as Martingale, the Dollmer and Miller systems.
Conclusion. Based on the study of the model of evolution of capital with reinvestment in two strategies (the share of investment capital and the share of investment income), it can be concluded that they are equivalent from profit maximization. At the same time, the variation of strategies will allow the trader to minimize the obligations, depending on current market prices, and, consequently, to reduce the risks of local losses. In some cases (high-speed or inconsistent trading) the use of simplified Kelly criteria is sufficiently justified. The research also confirms (contrary to the position of an efficient market) the feasibility and effectiveness of capital management methods such as R.Vinse's optimal, Kelly's criterion and value betting.