## Archive for the ‘**arbitrage**’ Category

## Trading task in classic mechanics

In physics, action is an attribute of system dynamics. By definition it is a functional over trajectory or history of the system:

where L is the Lagrangian. The real beauty of such description lies in developed and well studied mechanism of equation solutions.

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## Correlation trading on FX

Correlation trading is based on few simple ideas:

- Correlations are changing with time
- Correlations of pairs of 3 currencies are bounded by strict equation
- Correlation is bound in the interval

Therefore, one may try to “buy correlation” at -1 and to “sell it” at +1.