Modeling a foreign exchange rate using moving average of Yen-Dollar market data

Takayuki Mizuno, Misako Takayasu and Hideki Takayasu
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Takayuki Mizuno: Tokyo Institute of Technology
Misako Takayasu: Tokyo Institute of Technology
Hideki Takayasu: Sony Computer Science Laboratories

A chapter in Practical Fruits of Econophysics, 2006, pp 57-61 from Springer

Abstract: Summary We introduce an autoregressive-type model with self-modulation effects for a foreign exchange rate by separating the foreign exchange rate into a moving average rate and an uncorrelated noise. From this model we indicate that traders are mainly using strategies with weighted feedbacks of the past rates in the exchange market. These feedbacks are responsible for a power law distribution and characteristic autocorrelations of rate changes.

Keywords: Foreign exchange market; Self-modulation effect; Autoregressive (AR) process; Econophysics (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-4-431-28915-9_9

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DOI: 10.1007/4-431-28915-1_9

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