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Forecasting foreign exchange rates with adaptive neural networks using radial-basis functions and Particle Swarm Optimization

Georgios Sermpinis, Konstantinos Theofilatos, Andreas Karathanasopoulos, Efstratios F. Georgopoulos and Christian Dunis

European Journal of Operational Research, 2013, vol. 225, issue 3, 528-540

Abstract: The motivation for this paper is to introduce a hybrid neural network architecture of Particle Swarm Optimization and Adaptive Radial Basis Function (ARBF–PSO), a time varying leverage trading strategy based on Glosten, Jagannathan and Runkle (GJR) volatility forecasts and a neural network fitness function for financial forecasting purposes. This is done by benchmarking the ARBF–PSO results with those of three different neural networks architectures, a Nearest Neighbors algorithm (k-NN), an autoregressive moving average model (ARMA), a moving average convergence/divergence model (MACD) plus a naı¨ve strategy. More specifically, the trading and statistical performance of all models is investigated in a forecast simulation of the EUR/USD, EUR/GBP and EUR/JPY ECB exchange rate fixing time series over the period January 1999–March 2011 using the last 2years for out-of-sample testing.

Keywords: Adaptive Radial Basis Function; Partial Swarm Optimization; Forecasting; Quantitative trading strategies (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:225:y:2013:i:3:p:528-540

DOI: 10.1016/j.ejor.2012.10.020

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