Analysis Of Foreign Exchange Portfolio Optimization Strategy Based On Mean-Variance Model

For any country,the financial industry is an indispensable part for the orderly development of the national economy.It plays a pivotal role in supporting the development of the real economy and promoting lending and financing among various industries.As China's financial market laws and regulations continue to improve and gradually integrate with the international financial market,while the investment in stocks,funds,bonds and other products continue to rise,foreign exchange investment has gradually become another important investment area after stock investment.Since foreign exchange investment adopts a leveraged trading model,it not only increases the profit but also amplifies the risk.How to effectively manage and avoid risks under the premise of obtaining higher returns becomes an important issue in investment.This paper takes the daily closing exchange rate of the seven major direct currency pairs in the foreign exchange market as the research object,and uses the mean-variance model as the main research tool.Firstly,the statistical characteristics of the currency pair exchange rate data are analyzed and discussed,and the approximate data contours are drawn.Secondly,based on the intricate relationship among the currencies in foreign exchange investment,the income and risk are used as the central variables,using the GARCH model fits and predicts the time series of seven direct currency pairs in the foreign exchange market.Thirdly,considering the actual use of margin trading in the foreign exchange market,the classic Markowitz(mean-variance)model was amended and the model was used to formulate the foreign exchange investment strategy for the next few trading days.Finally,for the inherent defects of the classic M-V model,this paper also explores the mean-variance model for increasing the VaR constraint condition,on which the foreign exchange proportion is determined.The research results show that choosing the optimal portfolio strategy according to the model helps investors to rationally allocate wealth among various currency pairs,so as to obtain the highest expected return rate under certain risk control conditions or minimize investment risk and reduce losses under rate conditions.