Exchange Rate Prediction Problem [Theodossious, 1994; The Financial Review].
Exchange Rates
- Impact world economy
- Determine value of international investments
- Canadian-U.S. exchange rate behavior important because of strong Canadian and U.S. trading relationship
Stochastic Properties of U.S. Exchange Rates
- Forecasting exchange rate movements is a challenging task.
- GARCH (Generalized Autoregressive Conditional Heteroskedasticity) processes useful for modeling exchange rate processes.
- Canadian exchange rate processes specifically appear to be GARCH (Akgiray and Booth, 1991, Journal of Multinational Financial Management)