The growing complexity of many real world problems is one of the biggest challenges of our time. The area of international finance is one prominent example where decision making is often fraud to mistakes, and tasks such as forecasting, trading and hedging exchange rates seem to be too difficult to expect correct or at least adequate decisions. From the high complexity of the foreign exchange market and related decision problems, the author derives the necessity to use tools from Machine Learning and Artificial Intelligence, e.g. Support Vector Machines, and to combine such methods with sophisticated financial modelling techniques. The suitability of this combination of ideas is demonstrated by an empirical study and by simulation.
Author(s): Christian Ullrich (auth.)
Series: Lecture Notes in Economics and Mathematical Systems 623
Edition: 1
Publisher: Springer-Verlag Berlin Heidelberg
Year: 2009
Language: English
Pages: 207
Tags: Business Information Systems; Finance /Banking; Quantitative Finance; Artificial Intelligence (incl. Robotics); Financial Economics
Front Matter....Pages 1-14
Front Matter....Pages 1-1
Motivation....Pages 3-6
Analytical Outlook....Pages 7-12
Front Matter....Pages 14-14
Equilibrium Relationships....Pages 15-25
Market Efficiency Concepts....Pages 27-28
Views from Complexity Theory....Pages 29-37
Conclusions....Pages 39-39
Front Matter....Pages 42-42
Introduction....Pages 43-45
Statistical Analysis of Daily Exchange Rate Data.....Pages 47-63
Support Vector Classification....Pages 65-82
Description of Empirical Study and Results....Pages 83-103
Front Matter....Pages 106-106
Introduction....Pages 107-115
Preferences over Probability Distributions....Pages 117-131
Problem Statement and Computational Complexity....Pages 133-140
Model Implementation....Pages 141-161
Simulation/Optimization Experiments....Pages 163-179
Front Matter....Pages 182-182
Exchange Rate Forecasting with Support Vector Machines....Pages 183-184
Front Matter....Pages 1-1
Exchange Rate Hedging in a Simulation/Optimization Framework....Pages 185-188
Back Matter....Pages 1-17
