Modeling and Simulation of Currency Exchange Rate Using Multifractional Process with Random Exponent - Volume 2 Number 3 (Jun. 2012) - ijmo
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General Information
Editor-in-chief
Prof. Adrian Olaru
University Politehnica of Bucharest, Romania
I'm happy to take on the position of editor in chief of IJMO. It's a journal that shows promise of becoming a recognized journal in the area of modelling and optimization. I'll work together with the editors to help it progress.
IJMO 2012 Vol.2(3): 309-314 ISSN: 2010-3697
DOI: 10.7763/IJMO.2012.V2.133

Modeling and Simulation of Currency Exchange Rate Using Multifractional Process with Random Exponent

Sergio Bianchi, Alexandre Pantanella, and Augusto Pianese

Abstract—In this work, assuming as a model the Multifractional Processes with Random Exponent (MPRE), we propose a simulation algorithm able to replicate financial time series, specifically pertaining to the FX market. We show how, properly choosing the functional parameter of the MPRE, the simulated series fit with significant accuracy the actual ones. It is worthwhile to underline that the sole knowledge of the functional parameter ensures by itself that the surrogates succeed in replicating the empirical data. The results can be used in scenario analysis as well as in forecasting.

Index Terms—Financial modeling, goodness of fit, multifractional processes, simulation.

S. B. Author is with the Department of Economics and Law, University of Cassino, (FR), Italy, (e-mail: sbianchi@eco.unicas.it).
A. P. Author is with the Department of Economics and Law, University of Cassino, (FR), Italy, (e-mail: a.pantanella@eco.unicas.it).
A. P. Author is with the Department of Economics and Law, University of Cassino, (FR), Italy, (e-mail: pianese@unicas.it).

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Cite: Sergio Bianchi, Alexandre Pantanella, and Augusto Pianese, "Modeling and Simulation of Currency Exchange Rate Using Multifractional Process with Random Exponent," International Journal of Modeling and Optimization vol. 2, no. 3, pp. 309-314, 2012.

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