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by Benziger Alice Priyanka Snehal Khair Prakash SuseendranVigeendharan Tiwari Ashutosh

by Benziger Alice Priyanka Snehal Khair Prakash SuseendranVigeendharan Tiwari Ashutosh. Quantitative Trading Strategies On the short-term predictability of exchange rates:A BVAR time-varying parameters approach -Nicholas Sarantis.

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by Benziger Alice Priyanka Snehal Khair Prakash SuseendranVigeendharan Tiwari Ashutosh

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  1. by Benziger Alice Priyanka SnehalKhairPrakash SuseendranVigeendharan TiwariAshutosh Quantitative Trading StrategiesOn the short-term predictability of exchange rates:A BVAR time-varying parameters approach -Nicholas Sarantis

  2. implemented BVAR-TVP parameters in matlab Kalman implementation – Kalman toolbox in matlab Data – Bloomberg Optimization done for two parameters out of six (due to computation constraints), rest 4 parameters best fit value is used as per recommendation in paper Procedures used and Implementation methodologies applied

  3. The BVAR TVP parameters are regressed against recent data points ( last 1 month ) instead of the entire data points . Advantages Less Computations. Faster results. More importance to recent Trends For GBP/USD This approach gives rise to higher annualized returns and less RMSE GBP/USD returns obtained are 41% and is better than the 5.7% returns obtained by using the approach mentioned in paper by author. Improvisations

  4. The daily excess returns over the period (t, t+1), it, from this trading strategy are obtained as follows: where zt= +1 for long (buy signal) FC position and zt = -1 for short (sell signal) FC TRADING STRATEGY

  5. Results –GBP /USD ( 1991 – 2000)

  6. Forecasting accuracy performance for GBP /USD ( 1991 – 2000) • RMSE obtained by BVAR-TVP model is less than random walk. Hence the prediction using this model is more accurate than a random walk model. • RMSE Less than the RMSE obtained by the Author • Returns obtained by using the trading strategy mentioned earlier are substantial, suggesting model is accurate in prediction of FX rates.

  7. Results –JPY/USD ( 1991 – 2000)

  8. Forecasting accuracy performance JPY/USD ( 1991 – 2000) • RMSE obtained by BVAR-TVP model is less than random walk. Hence the prediction using this model is more accurate than a random walk model. • Returns obtained by using the strategy are low but substantial.

  9. Financial Econometrics Kalman Filter: some applications to Finance University of Evry - Master 2 Modelling and forecasting exchange rates with a Bayesian time-varying coefficient model Fabio Canova* http://www.cs.unc.edu/~welch/kalman/ http://www.cs.ubc.ca/~murphyk/Software/Kalman/kalman_download.html http://en.pudn.com/downloads158/sourcecode/others/detail706436_en.html References

  10. Thank You

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