File Type : Paper
Keywords: GMDH, self-organizing polynomial networks, time series analysis, exchange rate
prediction, FX hedging
Abstract : Exchange rate forecasting is an important fi nancial problem that is receiving increasing attention
nowadays especially because of its diffi culty and host of practical applications in globalising
world of today. The paper presents an enhanced MIA-GMDH-type network, discusses its design
methodology and carries out some numerical experiments in the fi eld of exchange rate forecasting.
The method presented in this paper is an enhancement of self-organizing polynomial Group
Method of Data Handling (GMDH) with several specifi c improved features - coeffi cient rounding
and thresholding schemes and semi-randomized selection approach to pruning. The experiments
carried out include exchange rate prediction and hedging case study where the predictions were
used for fi nancial management decision simulation of a virtual company. The results indicate,
that the method shows promising potential of self-organizing network methodology. This implies
that the proposed modelling approaches can be used as a feasible solution for exchange rate
forecasting in fi nancial management.
Author Affiliation : Faculty of the International Relations, University of Economics, Prague.
Sources : PRAGUE ECONOMIC PAPERS, 3, 2011
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