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Independent Component Analysis And The Application In Exchange Rates

Posted on:2010-11-06Degree:MasterType:Thesis
Country:ChinaCandidate:X Y LiuFull Text:PDF
GTID:2189360302459516Subject:Financial engineering
Abstract/Summary:PDF Full Text Request
The exchange rate is always one of the most important aspects. In the aspect of SPOT Market, the exchange rate of RMB is not pegged to the US dollar after the start of Chinese currency regime, and begin to refer to a basket of currencies. Thus, the volatility of RMB exchange rate is connect to volatility of the currencies in the basket. In the aspect of Forward Market, because Chinese DF Market is not complete yet, the NDF Market plays a important role in the pricing of RMB exchange rate, and the volatility of the market could threaten the stabilization of the RMB exchange rate. For the aim to study the volatility of the RMB exchange rate in the aspects, we suggest using Independent Component Analysis to decompose multivariate time series into statistically independent time series, which could solve the Course Dimensionality. We propose to use ICA-GARCH model which computationally efficient to estimate the multivariate volatilities in the problem of the basket currencies of RMB exchange rate and based on it, we analyze the operation of newly-reformed Chinese currency regime. At the same time, we estimate the volatilities of forward exchange contracts with different maturities in NDF Market and based on it, analyze the Term Structure of the Forward Contracts. Finally, we talk about the pricing of the RMB exchange rate.
Keywords/Search Tags:Independent Component Analysis, Multivariate Volatilities, Dynamic Correlation, a basket of currencies, NDF with different maturities
PDF Full Text Request
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