They also incorporate genetic algorithm as an optimizing technique for adapting parameters of ANN which is then compared with standard backpropagation and backpropagation combined with K-means clustering algorithm.Finally, the authors find out that their suggested hybrid neural network is able to produce more accurate forecasts than the standard models and can be helpful in eliminating the risk of making the bad decision in decision-making process. Profits or losses accrue as the exchange rate of that currency fluctuates on the open market.
This reduces rounding issues and the need to use excessive numbers of decimal places.
There are some exceptions to this rule: for example, the Japanese often quote their currency as the base to other currencies.
Authors test the suggested model on high-frequency time series data of USD/CAD and examine the ability to forecast exchange rate values for the horizon of one day.
To determine the forecasting efficiency, they perform a comparative statistical out-of-sample analysis of the tested model with autoregressive models and the standard neural network.
The real exchange rate (RER) is the purchasing power of a currency relative to another at current exchange rates and prices.
It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.The authors suggest a new hybrid neural network which is a combination of the standard RBF neural network, a genetic algorithm, and a moving average.The moving average is supposed to enhance the outputs of the network using the error part of the original neural network.Individual traders comprise a very small part of this market.Because of the volatility in the price of foreign currency, losses can accrue very rapidly, wiping out an investor’s down payment in short order.Forex contracts involve the right to buy or sell a certain amount of a foreign currency at a fixed price in U. It is extremely rare that individual traders actually see the foreign currency.