Continuous time modified Cox-Ingersoll-Ross (1985) stochastic model is employed, combining with Hamilton (1989) type Markov regime switching framework, to study daily foreign exchange rates, where all parameter values depend on the value of a continuous time Markov chain. The Expectation-Maximization algorithm is extended, generalized, applied to a more general class of regime switching models ...

Abstract: Computational intelligence approaches have gradually established themselves as a popular tool for forecasting the complicated financial markets. Forecasting accuracy is one of the most important features of forecasting models; hence, never has research directed at improving upon the effectiveness of time series models stopped. Nowadays, despite the numerous time series forecasting mod...

This study proposes a novel forecasting approach – an adaptive smoothing neural network (ASNN) – to predict foreign exchange rates. In this new model, adaptive smoothing techniques are used to adjust the neural network learning parameters automatically by tracking signals under dynamic varying environments. The ASNN model can make the network training process and convergence speed faster, and m...

In this chapter, the authors use an EGARCH-ECM to estimate the pass-through effects of Foreign Exchange (FX) rate changes and changes in producers’ prices for 20 U.K. export sectors. The long-run adjustments of export prices to FX rate changes and changes in producers’ prices are within the range of –1.02% (for the Textiles sector) and –17.22% (for the Meat sector). The contemporaneous PricingT...

We present a machine learning approach using the sparse grid combination technique for the forecasting of intraday foreign exchange rates. The aim is to learn the impact of trading rules used by technical analysts just from the empirical behaviour of the market. To this end, the problem of analyzing a time series of transaction tick data is transformed by delay embedding into a D-dimensional re...

Abstract-Foreign exchange market is the largest and the most important one in the world. Foreign exchange transaction is the simultaneous selling of one currency and buying of another currency. It is essential for currency trading in the international market. In this paper, we have investigated Artificial Neural Networks based prediction modelling of foreign exchange rates using five different ...

Abstract This paper empirically examines the likelihood of any long-run relationship between real exchange rate and real interest rate (RERI) differentials in China using vector autoregressive model (VAR) and hybrid cointegration methodology. The preliminary results based on some limited monthly data are indicative of a rather weak long run relationship. However, the empirical investigation als...

This paper estimates the foreign exchange rate exposure of 6,917 U.S. nonfinancial firms on the basis of stock prices and corporate cash flows. The results show that several firms are significantly exposed to at least one of the foreign exchange rates Canadian Dollar, Japanese Yen and Euro, and significant exposures are more frequent at longer horizons. The percentage of firms for which stock p...

The paper examines the economic role of modelling information on the decision problem of an exporting firm under exchange rate risk and hedging. Information is described in terms of market transparency, i.e., a publicly observable signal conveys more information about the random foreign exchange rate. We analyze the interaction between market transparency and the ex ante expected utility of the...