Modeling and Simulation of Currency Exchange Rates Using MPRE

2010 International Conference on Modeling, Simulation and Control, pp. 148-153, Cairo Egypt

6 Pages Posted: 18 Jul 2011 Last revised: 30 Jul 2011

See all articles by Sergio Bianchi

Sergio Bianchi

University of Cassino

Alexandre Pantanella

University of Cassino

Augusto Pianese

affiliation not provided to SSRN

Date Written: July 28, 2011

Abstract

In this work, assuming as a model the Multifractional Processes with Random Exponent (MPRE), we propose a simulation algorithm able to replicate financial time series, specifically pertaining to the FX market. We show how, properly choosing the functional parameter of the MPRE, the simulated series fit with significant accuracy the actual ones. It is worthwhile to underline that the sole knowledge of the functional parameter ensures by itself that the surrogates succeed in replicating the empirical data. The results can be used in scenario analysis as well as in forecasting.

Keywords: financial modeling, multifractional processes, simulation, goodness of fit

JEL Classification: C12, C13, C22, F31

Suggested Citation

Bianchi, Sergio and Pantanella, Alexandre and Pianese, Augusto, Modeling and Simulation of Currency Exchange Rates Using MPRE (July 28, 2011). 2010 International Conference on Modeling, Simulation and Control, pp. 148-153, Cairo Egypt, Available at SSRN: https://ssrn.com/abstract=1888212

Sergio Bianchi (Contact Author)

University of Cassino ( email )

Via S. Angelo - Campus Folcara
Dept. of Economics and Law
Cassino, 03043
Italy
+3907762994846 (Phone)
+390776393034 (Fax)

HOME PAGE: http://www.docente.unicas.it/sergio_bianchi

Alexandre Pantanella

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy

Augusto Pianese

affiliation not provided to SSRN ( email )

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