Identifying Turning Points of Currency Market Microtrends

Student: Zakutniaia Anna

Supervisor: Mikhail Kamrotov

Faculty: Faculty of World Economy and International Affairs

Educational Programme: World Economy (Master)

Year of Graduation: 2016

In this research there was introduced the notion of ‘tipping points’ that take place on the foreign exchange markets. The paper focuses on the causes of such ‘tippy’ states’ occurrence and proposes an instrument for their timely detection using methods from dynamical systems theory and the concept of the permutation entropy which is a measure of market uncertainty. There were carried out several experiments in order to find out whether it is possible to identify moments of tipping points’ occurrence using permutation entropy values. Moreover, applying linear and nonlinear classification techniques that changed investors’ trading rules after the market tipping points detection there was also proposed an empirical definition of such transition states in terms of entropy values.

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