Related papers: Exchange Rate Predictability in a Changing World
A wide variety of physical systems ranging from the firing of neurons to eutrophication of lakes to the presence of Arctic summer sea ice exhibit a phenomenon known as tipping. In mathematical models, tipping can be caused by bifurcations,…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
We propose an extension of the preferential attachment scheme by allowing the connecting probability to depend on time t. We estimate the parameters involved in the model by minimizing the expected squared difference between the number of…
The paper develops a new class of financial market models. These models are based on generalized telegraph processes: Markov random flows with alternating velocities and jumps occurring when the velocities are switching. While such markets…
Synchronization is a phenomenon in which a pair of fluctuations adjust their rhythms when interacting with each other. We measure the degree of synchronization between the U.S. dollar (USD) and euro exchange rates and between the USD and…
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
A few characteristic exponents describing power law behaviors of roughness, coherence and persistence in stochastic time series are compared to each other. Relevant techniques for analyzing such time series are recalled in order to…
We propose a Genetic Programming architecture for the generation of foreign exchange trading strategies. The system's principal features are the evolution of free-form strategies which do not rely on any prior models and the utilization of…
This brief paper summarize the chances offered by the Peak-Over-Threshold method, related with analysis of extremes. Identification of appropriate Value at Risk can be solved by fitting data with a Generalized Pareto Distribution. Also an…
We develop a theory for inferring equilibrium transition rates from trajectories driven by a time dependent force using results from stochastic thermodynamics. Applying the Kawasaki relation to approximate the nonequilibrium distribution…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
Models of biological systems often have many unknown parameters that must be determined in order for model behavior to match experimental observations. Commonly-used methods for parameter estimation that return point estimates of the…
In a constantly changing world, animals must account for environmental volatility when making decisions. To appropriately discount older, irrelevant information, they need to learn the rate at which the environment changes. We develop an…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Accurate prediction of price behavior in the foreign exchange market is crucial. This paper proposes a novel approach that leverages technical indicators and deep neural networks. The proposed architecture consists of a Long Short-Term…
This paper aims to reevaluate the Taylor Rule, through a linear and a nonlinear method, such that its estimated federal funds rates match those actually previously implemented by the Federal Reserve Bank. In the linear method, this paper…
This paper models yearly exchange rates between USD/KZT, EUR/KZT and SGD/KZT, and compares the actual data with developed forecasts using time series analysis over the period from 2006 to 2014. The official yearly data of National Bank of…
Matrix-variate data of high dimensions are frequently observed in finance and economics, spanning extended time periods, such as the long-term data on international trade flows among numerous countries. To address potential structural…
In this chapter, we review variance selection for time-varying parameter (TVP) models for univariate and multivariate time series within a Bayesian framework. We show how both continuous as well as discrete spike-and-slab shrinkage priors…
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial…