A study on the influence of the discretisation unit on the effectiveness of modelling currency exchange rates using the binary-temporal representation
Journal Title: Operations Research and Decisions - Year 2018, Vol 28, Issue 2
Abstract
An exchange rate can be expressed in the form of a binary-temporal representation. Such a representation is based on a discretization of movements in the exchange rate, in which to each change in the value - equal to a given discretization unit – two parameters are allocated: a binary value, consistent with the direction of change in the exchange rate (increase 1, decrease 0) and duration. Statistical examination proves the existence of dependencies between the parameters of previous changes and the direction of future changes. To model the exchange rate using the applied binary-temporal representation, an appropriate model was developed that enables estimation of the probability of the direction of future changes in the currency exchange rate based on the parameters of historical changes. This article presents an analysis of the influence of the chosen discretization unit on the quality of exchange rate modelling. For this purpose, software was written in MQL4 and C++. As a result of the study, an optimal value for the discretization unit and the optimal parameters of the model providing the highest efficiency were determined. The input data used in the analysis involved tick data for the AUD/NZD exchange rate for a five-year time frame 2012–2017.
Authors and Affiliations
Michał Dominik STASIAK
Keywords
Related Articles
- EP ID EP459634
- DOI 10.5277/ord180204
- Views 44
- Downloads 0
Implications of market frictions: serial correlations in indexes on the emerging stock markets in Central and Eastern Europe
Implications of market frictions in the context of serial correlations in indexes on the Central and Eastern European (CEE) stock markets have been analysed. Market frictions, such as non-trading effects, bid/ask spreads...
Graphical presentation of a measure of an employee's competence for a job position
The main objective of this paper was to develop a graphical presentation of a measure of an employee’s competence (ECVM) for a job position. In this context, the essence and formula for measuring the value of an employee...
Theoretical and methodological bases of threats. The method of security management support
A new approach to threat analysis and management of security understood has been presented. Threats have been analyzed in a wide theoretical-methodological range with particular emphasis on the need for the system-wide a...
Localizing of the atmospheric contamination source based on the Kori field tracer experiment data
Accidental releases of hazardous material into the atmosphere pose high risks to human health and the environment. Thus it would be valuable to develop an emergency reaction system which can recognize the probable locati...
Residential electricity consumption in Poland
Key factors influencing electricity consumption in the residential sector in Poland have been iden-tified. A fixed-effects model was used, which includes time effects, and a set of covariates, based on the model develope...