Hybrid method reveals true currency correlations.
problem Identify currency status in foreign exchange networks.
method Combines DCCC and network deconvolution to filter indirect effects.
result Reflects currency status changes and is more stable.
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48 results for “foreign currency exchange networks”
There are many studies dealing with the analysis of similarity among currencies in foreign exchange market by using network analysis approach. In those studies, each currency is represented by a univariate time series of exchange rate return. This is the standard practice to analyze the underlying information in the fo…
Study shows demonetization strengthened Indian currency and stock market.
problem Impact of demonetization on Indian stock market and foreign exchange rate.
method Daily rate of return analysis of foreign exchange rate and Nifty 50 index, use of dummy variable for demonetization period.
result Demonetization led to an upward trend in Indian stock market and strengthened the Indian currency (decreased foreign exchange rate).
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 puzzle to explain, since assuming foreign exchange risk is uninhibited and the …
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group together all the exchange rates with a common base currency and study each group separa…
We investigate topology and temporal evolution of the foreign currency exchange market viewed from a weighted network perspective. Based on exchange rates for a set of 46 currencies (including precious metals), we construct different representations of the FX network depending on a choice of the base currency. Our resu…
Model estimates foreign exchange reserve compositions of undisclosed central banks.
problem Limited information on central bank reserve compositions hinders analysis.
method Hidden Markov Model relating portfolio valuation to exchange rates.
result China's reserve composition likely matches global average, while Singapore holds fewer US dollars.
Model shows triangular arbitrage key to cross-currency correlations in forex markets.
problem Understanding cross-currency correlations in forex markets.
method Agent-based model of market interactions.
result Triangular arbitrage is primary driver of cross-currency correlations.
Scaling Analysis on Indian Foreign Exchange Marketphysics.soc-ph
In this paper we investigate the scaling behavior of the average daily exchange rate returns of the Indian Rupee against four foreign currencies namely US Dollar, Euro, Great Britain Pound and Japanese Yen. Average daily exchange rate return of the Indian Rupee against US Dollar is found to exhibit a persistent scaling…
Machine learning models predict EUR/USD currency direction with 58.52% accuracy.
problem Predicting the directional movement of EUR/USD in the Foreign Exchange market.
method Comparative analysis of machine learning models, including decorrelated and non-decorrelated feature sets, and meta-estimators.
result 58.52% accuracy for one-day ahead forecasts.
Correlation Networks Among Currenciesphysics.soc-ph
By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countri…
In a system containing a large number of interacting stochastic processes, there will typically be many non-zero correlation coefficients. This makes it difficult to either visualize the system's inter-dependencies, or identify its dominant elements. Such a situation arises in Foreign Exchange (FX) which is the world's…
Time-scale dependence of correlations among foreign currenciescond-mat.stat-mech
For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a…
Develops optimal trading strategy for illiquid currency pairs.
problem Maximizes revenues for a broker liquidating an illiquid currency pair.
method Uses a currency triplet strategy, considering model ambiguity, and employs simulations.
result Mean P&L increases and standard deviation decreases as ambiguity aversion increases.
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 puzzle to explain, since assuming foreign exchange risk is uninhibited and the mark…
Detect anomalies in complex networks using topological subspace detectors.
problem Detect anomalies in complex networks defined by simplicial complexes.
method Formulate a hypothesis testing framework using Neyman-Pearson matched topological subspace detectors.
result Effective detection of anomalies in foreign currency exchange networks and other real-world data.
The team predicts foreign exchange rates using clustering and attention models.
problem Complexity and unexpected events in foreign exchange markets.
method Clustering and attention models applied to historical data.
result Improved event-driven price prediction for oversold scenarios.
Graph learning improves FXRP and FXSA with significant statistical arbitrage gains.
problem Improving FXRP and FXSA with complex multi-currency and interest rate relationships.
method Two-step graph learning approach: first, edge-level regression on spatiotemporal graph; second, stochastic optimization with constraints and risk-adjusted return maximization.
result Graph-learning method achieves higher information and Sortino ratios than benchmarks.
Correlation matrices of foreign exchange rate time series are investigated for 60 world currencies. Minimal Spanning Tree (MST) graphs for the gold, silver and platinum are presented. Inverse power like scaling is discussed for these graphs as well as for four distinct currency groups (major, liquid, less liquid and no…
Using Recurrent Neural Networks To Forecasting of Forexcond-mat.dis-nn
This paper reports empirical evidence that a neural networks model is applicable to the statistically reliable prediction of foreign exchange rates. Time series data and technical indicators such as moving average, are fed to neural nets to capture the underlying "rules" of the movement in currency exchange rates. The …
It is well known that traded foreign exchange forwards and cross currency swaps (CCS) cannot be priced applying overnight cash and carry arguments as they imply absence of funding advantage of one currency to the other. This paper proposes a heuristic present value concept for multi-currency pricing and hedging which a…
Paper uses machine learning to forecast significant currency exchange rate fluctuations.
problem Forecasting significant daily returns in foreign exchange markets.
method Applying nine modern machine learning algorithms to data on four major currency pairs over 10 years, focusing on outlier detection methods.
result Outlier detection methods significantly outperform traditional techniques, with PKDE method producing the best results.
Frequency analysis of tick quotes on the foreign exchange market and agent-based modeling: A spectral distance approachphysics.data-an
High-frequency financial data of the foreign exchange market (EUR/CHF, EUR/GBP, EUR/JPY, EUR/NOK, EUR/SEK, EUR/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY, USD/NOK, and USD/SEK) are analyzed by utilizing the Kullback-Leibler divergence between two normalized spectrograms of the tick frequency and the generalized Jensen-Sha…
Study proposes a method to construct copulas using corrected Hermite polynomial expansion for estimating foreign exchange volatility.
problem Estimating cross foreign exchange volatility with complex correlation structures.
method Applying corrections to the finite sum of multivariate Hermite polynomial expansions to construct copulas.
result The proposed copula method accurately reproduces the volatility smile of cross currency pairs.
This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear periodic in nature, and not involve smooth convergence to a "balanced" ensemble of exc…
Market Efficiency in Foreign Exchange Marketsphysics.soc-ph
We investigate the relative market efficiency in financial market data, using the approximate entropy(ApEn) method for a quantification of randomness in time series. We used the global foreign exchange market indices for 17 countries during two periods from 1984 to 1998 and from 1999 to 2004 in order to study the effic…
Emerging economies use countercyclical policies to manage crises and dominant currencies.
problem Managing economic crises and fluctuations in dominant currencies like USD and EUR.
method Theoretical analysis, case studies, econometric modeling.
result Emerging economies can stabilize growth with countercyclical monetary policies.
This paper uses two hierarchical techniques, a minimal spanning tree and an ultrametric hierarchical tree, to extract a topological influence map for major currencies from the ultrametric distance matrix for 1996-2001. We find that these two techniques generate a defined and robust scale free network with meaningful ta…
Study optimal investment strategies for an insurer in two currency markets.
problem Maximizing expected exponential utility of terminal wealth for an insurer in two currency markets.
method Dynamic programming method applied to solve Hamilton-Jacobi-Bellman equations.
result Optimal investment strategies and value functions are derived.
We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of transactions) for various currency pairs and the corresponding standard deviations holds…
World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 -- M…
We have presented a novel technique of detecting intermittencies in a financial time series of the foreign exchange rate data of U.S.- Euro dollar(US/EUR) using a combination of both statistical and spectral techniques. This has been possible due to Continuous Wavelet Transform (CWT) analysis which has been popularly a…
We analyze the multifractal spectra of daily foreign exchange rates for Japan, Hong-Kong, Korea, and Thailand with respect to the United States Dollar from 1991 to 2005. We find that the return time series show multifractal spectrum features for all four cases. To observe the effect of the Asian currency crisis, we als…
Lead-lag relationships among assets represent a useful tool for analyzing high frequency financial data. However, research on these relationships predominantly focuses on correlation analyses for the dynamics of stock prices, spots and futures on market indexes, whereas foreign exchange data have been less explored. To…
Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads to a proportional cost whose instantaneous marginal value depends on the current …
Using a Levy process we generalize formulas in Bo et al.(2010) for the Esscher transform parameters for the log-normal distribution which ensure the martingale condition holds for the discounted foreign exchange rate. Using these values of the parameters we find a risk-neural measure and provide new formulas for the di…
Optimal dividend strategy for insurance company in foreign currency.
problem Maximizing dividends paid in a foreign currency until ruin.
method Spectrally negative Lévy process, exponentially Lévy exchange rate, Hamilton--Jacobi--Bellman equation.
result Single dividend barrier strategy is optimal.
Using Network-based Causal Inference to Detect the Sources of Contagion in the Currency Marketq-fin.ST
New method detects currency contagion sources using causal inference.
problem Lack of causal interpretation in quantifying contagion among currencies.
method Network-based causal inference to identify contagion paths.
result Identifies sources of contagion and diversification options.
Central bank strategy to maintain currency exchange rate within limits.
problem Maintaining a currency exchange rate within a target zone despite adverse economic trends.
method Modeling the problem with a continuous-time market impact model and solving it as a stochastic control problem.
result Optimal strategy minimizes accumulated inventory of foreign currency.
This research uses empirical copulas to price quanto options, showing significant differences from traditional models.
problem The dependence relation between currency and asset prices affects quanto option pricing.
method Empirical copulas are used to model the dependence between currency and asset prices.
result Empirical copulas provide non-negligible pricing differences compared to traditional models.
Topology of Currencies: Persistent Homology for FX Co-movements: A Comparative Clustering Studystat.ML
TDA improves FX clustering quality over traditional methods.
problem Capturing complex currency co-movements in FX markets.
method Topological Data Analysis (TDA) compared to traditional statistical methods on monthly FX returns.
result TDA-based clustering yields more compact and well-separated clusters.
The aim of this paper is to determine the Value at Risk (VaR) of the portfolio consisting of long positions in foreign currencies on an emerging market. Basing on empirical data we restrict ourselves to the case when the tail parts of distributions of logarithmic returns of these assets follow the power laws and the lo…
Study compares models for pricing multi-strike quanto call options with SV, SC, and SER.
problem Pricing multi-strike quanto call options with stochastic volatility, correlation, and exchange rates.
method Comparative analysis of SV, SC, and SER models; Monte Carlo simulation; Milstein scheme; antithetic variates; correlation risk parameters.
result GARCH-Jump SV, Weibull SC, and Ornstein Uhlenbeck (OU) SER model combination performs best.
We study the Heston-Cox-Ingersoll-Ross++ stochastic-local volatility model in the context of foreign exchange markets and propose a Monte Carlo simulation scheme which combines the full truncation Euler scheme for the stochastic volatility component and the stochastic domestic and foreign short interest rates with the …
Cont-Bouchaud percolation model including Tobin taxcond-mat.stat-mech
The Tobin tax is an often discussed method to tame speculation and get a source of income. The discussion is especially heated when the financial markets are in crisis. In this article we refer to foreign exchange markets. The Tobin tax should be a small international tax affecting all currency transactions and thus co…
There is intense interest in understanding the stochastic and dynamical properties of the global Foreign Exchange (FX) market, whose daily transactions exceed one trillion US dollars. This is a formidable task since the FX market is characterized by a web of fluctuating exchange rates, with subtle inter-dependencies wh…
We propose a useful approach for investigating the statistical properties of foreign currency exchange rates. Our approach is based on queueing theory, particularly, the so-called renewal-reward theorem. For the first passage processes of the Sony Bank US dollar/Japanese yen (USD/JPY) exchange rate, we evaluate the ave…
This study investigates that a characteristic time scale on an exchange rate market (USD/JPY) is examined for the period of 1998 to 2000. Calculating power spectrum densities for the number of tick quotes per minute and averaging them over the year yield that the mean power spectrum density has a peak at high frequenci…