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Fractal Analysis of Forward Exchange Rates

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Author(s): Mária Bohdalová | Michal Greguš

Journal: Acta Polytechnica Hungarica
ISSN 1785-8860

Volume: 7;
Issue: 4;
Start page: 57;
Date: 2010;
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Keywords: fractal analysis | estimation dimension | long memory | financial time series

ABSTRACT
In this paper we work with nonparametric methods in modeling and analyzing thefinancial times series. We use the concept of fractal dimension for measuring thecomplexity of time series of observed financial data. The aim of this paper is to distinguishbetween the randomness and determinism of the financial information. We will compare thefractal analysis of the selected forward exchange rates. Fractal analysis has beenintroduced into financial time series by Mandelbrot and Peters. Due to the financial crisisthis theory has gained new momentum. Fractal analysis indicates that conventionaleconometric methods are inadequate for analyzing financial time series. Adequate analysisof the financial time series allows us to predict precisely the future values and risksconnected with portfolios that are influenced. We test for fractional dynamic behavior in a1-month forward exchange rate USD into GBP and Gold Price against USD.
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