A survey on exchange rate prediction using neural network based methods

  • Abstract
  • Keywords
  • References
  • PDF
  • Abstract

    Forecasting exchange rate has always been in demand as it is very important for the international traders to predict how their money will perform against other currencies. So different methods have been applied by the researchers to accurately predict the exchange rates so that it can assist in taking decision while trading. From all the models the Artificial Neural Network (ANN) has given consistent performance in prediction by overcoming the limitations of other models and has outperformed all the models in terms of efficiency. The evolution of ANN is remarkable. In this paper, we have given the performance of different network models used by researchers to predict the exchange rates of major currencies in the future.

  • Keywords

    Artificial Neural Network (ANN); Currencies; exchange rate; forecasting; outperformed.

  • References

      [1] Largest trading hubs https://www.investopedia.com/terms/f/foreign-exchange.asp

      [2] Foreign Exchange Market https://en.wikipedia.org/wiki/Foreign_exchange_market

      [3] Foreign Exchange Market https://en.wikipedia.org/wiki/Foreign_exchange_market

      [4] Richard A. Meese, and Kenneth Rogoff. "Empirical exchange rate models of the seventies: Do they fit out of sample?." Journal of international economics 14, no. 1-2 (1983): 3-24.

      [5] Don Alexander and Lee R. Thomas III. "Monetary/Asset models of Exchange Rate Determination: How well have they Performed in the 1980's?." International Journal of Forecasting 3, no. 1 (1987): 53-64.

      [6] Efficient Market Hypothesis https://en.wikipedia.org/wiki/Efficient-market_hypothesis#cite_note-7

      [7] Francesco Lisi and Rosa A. Schiavo. "A comparison between neural networks and chaotic models for exchange rate prediction." Computational Statistics & Data Analysis 30, no. 1 (1999): 87-102.

      [8] HuseyinInce and Theodore B. Trafalis. "A hybrid model for exchange rate prediction." Decision Support Systems 42, no. 2 (2006): 1054-1062.

      [9] Robert F. Engle. "Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation." Econometrica: Journal of the Econometric Society (1982): 987-1007.

      [10] Tim Bollerslev. "Generalized autoregressive conditional heteroskedasticity." Journal of Econometrics 31, no. 3 (1986): 307-327.

      [11] Erik W. Tyree and J. A. Long. "Forecasting currency exchange rates: neural networks and the random walk model." In City University Working Paper, Proceedings of the Third International Conference on Artificial Intelligence Applications. 1995.

      [12] Mona R. El Shazly and Hassan E. El Shazly. "Comparing the forecasting performance of neural networks and forward exchange rates." Journal of Multinational Financial Management 7, no. 4 (1997): 345-356.

      [13] JingtaoYao,Hean-LeePoh, and TeoJasic. "Foreign exchange rates forecasting with neural networks." In International Conference on Neural Information Processing (Hong Kong. 1996.

      [14] ChristianDunis and Mark Williams. "Modelling and trading the EUR/USD exchange rate: Do neural network models perform better?." Derivatives use, trading and regulation 8, no. 3 (2002): 211-239.

      [15] AdewoleAdetunji Philip, AkinwaleAdioTaofiki, and Akintomide Ayo Bidemi. "Artificial neural network model for forecasting foreign exchange rate." World of Computer Science and Information Technology Journal 1, no. 3 (2011): 110-118.

      [16] V. Ravi, Ramanuj Lal, and N. Raj Kiran. "Foreign exchange rate prediction using Computational Intelligence Methods." International Journal of Computer Information Systems and Industrial Management Applications 4 (2012): 659-670.

      [17] Christian L. Dunis, Jason Laws, and Ulrike Schilling. "Currency trading in volatile markets: Did neural networks outperform for the EUR/USD during the financial crisis 2007–2009?." Journal of Derivatives & Hedge Funds 18, no. 1 (2012): 2-41.

      [18] Olcay Erdogan and Ali Goksu. "Forecasting Euro and Turkish Lira Exchange Rates with Artificial Neural Networks (ANN)." International Journal of Academic Research in Accounting, Finance and Management Sciences 4, no. 4 (2014): 307-316.

      [19] Nathan D’ Lima and Shamsuddin S. Khan. "FOREX rate prediction using ANN and ANFIS."

      [20] Galeshchuk, Svitlana. "Neural networks performance in exchange rate prediction." Neurocomputing 172 (2016): 446-452.

      [21] Ashok K Nag and Amit Mitra. "Forecasting daily foreign exchange rates using genetically optimized neural networks." Journal of Forecasting 21, no. 7 (2002): 501-511.

      [22] He Ni and Hujun Yin. "Exchange rate prediction using hybrid neural networks and trading indicators." Neurocomputing 72, no. 13 (2009): 2815-2823.

      [23] Chakradhara Panda and V. Narasimhan. "Forecasting exchange rate better with artificial neural network." Journal of Policy Modeling 29, no. 2 (2007): 227-236.

      [24] Gioqinang Zhang and Michael Y. Hu. "Neural network forecasting of the British pound/US dollar exchange rate." Omega 26, no. 4 (1998): 495-506.

      [25] J. C. Carney, and Padraig Cunningham. "Neural networks and currency exchange rate prediction." Foresight Business Journal (1996).

      [26] JoarderKamruzzaman and Ruhul A. Sarker. "ANN-based forecasting of foreign currency exchange rates." Neural Information Processing-Letters and Reviews 3, no. 2 (2004): 49-58.

      [27] Suresh Kumar Sharma and Vinod Sharma. "Proficient Prophecy of Foreign Exchange Rate using Artificial Neural Network: A Case of USD to INR." International Journal of Computer Applications 43, no. 1 (2012).

      [28] Li Meng and Yang Sun. "Research on Automated Forex Trading System Based on BP Neural Network." In Advanced materials research, vol. 753, pp. 3080-3083. Trans Tech Publications, 2013.

      [29] V. Lavanya, and M. Parveentaj. "Foreign currency exchange rate (FOREX) using neural network." International Journal of Science and Research 2, no. 10 (2013): 174-177.

      [30] S. Kumar Chandar, M. Sumathi, and S. N. Sivanandam. "Forecasting of Foreign Currency Exchange Rate Using Neural Network."

      [31] Gour Sundar Mitra Thakur, Rupak Bhattacharyya, and Seema Sarkar Mondal. "Artificial neural network based model for forecasting of inflation in India." Fuzzy Information and Engineering 8, no. 1 (2016): 87-100.

      [32] Murthy, KV Bhanu. "Forecasting Foreign Exchange Rate during Crisis-A Neural Network Approach."

      [33] Chen, Joseph C., and Naga Hrushikesh R. Narala. "Forecasting Currency Exchange Rates via Feedforward Backpropagation Neural Network." (2017).

      [34] Sun Ye. "RMB exchange rate forecast approach based on BP neural network." Physics Procedia 33 (2012): 287-293.

      [35] Rudra P Pradhan and Rajesh Kumar. "Forecasting exchange rate in India: An application of artificial neural network model." Journal of Mathematics Research 2, no. 4 (2010): 111.

      [36] Lean Yu, Shouyang Wang, and Kin Keung Lai. "Hybridizing BPNN and Exponential Smoothing for Foreign Exchange Rate Prediction." Foreign-Exchange-Rate Forecasting With Artificial Neural Networks (2007): 121-131.

      [37] S. Kumar Chandar, M. Sumathi, and S. N. Sivanandam. "Neural network based forecasting of foreign currency exchange rates." International Journal on Computer Science and Engineering 6, no. 6 (2014): 202.

      [38] Ritanjali Majhi, Ganapati Panda, and Gadadhar Sahoo. "Efficient prediction of exchange rates with low complexity artificial neural network models." Expert systems with applications 36, no. 1 (2009): 181-189.

      [39] Yohhan Pao. "Adaptive pattern recognition and neural networks." (1989).

      [40] K. K. Sahu, G. R. Biswal, P. K. Sahu, S. R. Sahu, and H. S. Behera. "A CRO based FLANN for forecasting foreign exchange rates using FLANN." In Computational Intelligence in Data Mining-Volume 1, pp. 647-664. Springer, New Delhi, 2015.

      [41] Jagdish C. Patra, Nguyen C. Thanh, and Pramod K. Meher. "Computationally efficient FLANN-based intelligent stock price prediction system." In Neural Networks, 2009. IJCNN 2009. International Joint Conference on, pp. 2431-2438. IEEE, 2009.

      [42] C. M Anish and Babita Majhi. "Net asset value prediction using FLANN model." International Journal of Science and Research (IJSR 4, no. 2 (2015): 2222-2227.

      [43] Xian Hua, Defu Zhang, and Stephen CH Leung. "Exchange rate prediction through ANN Based on Kernel Regression." In Business Intelligence and Financial Engineering (BIFE), 2010 Third International Conference on, pp. 39-43. IEEE, 2010.

      [44] Pradyot Ranjan Jena, Ritanjali Majhi, and Babita Majhi. "Development and performance evaluation of a novel knowledge guided artificial neural network (KGANN) model for exchange rate prediction." Journal of King Saud University-Computer and Information Sciences 27, no. 4 (2015): 450-457.

      [45] A. ROUT. "Efficient Forecasting of Exchange rates with Recurrent FLANN. IOSR." Journal of Computer Engineering13, no. 6 (2013): 21-28.

      [46] Babita Majhi, Minakhi Rout, Ritanjali Majhi, Ganapati Panda, and Peter J. Fleming. "New robust forecasting models for exchange rates prediction." Expert Systems with Applications39, no. 16 (2012): 12658-12670.

      [47] Lean Yu, Kin Keung Lai, and Shouyang Wang. "Multistage RBF neural network ensemble learning for exchange rates forecasting." Neurocomputing 71, no. 16-18 (2008): 3295-3302.

      [48] Ai Sun and Jui-Fang Chang. "Application Of Radial Basis Function Neural Network To Predict Exchange Rate With Financial Time Series." International Journal on Smart Sensing and Intelligent Systems 10, no. 2 (2017): 308-326.

      [49] A. K. Dhamija, and V. K. Bhalla. "Financial time series forecasting: comparison of neural networks and ARCH models." International Research Journal of Finance and Economics 49 (2010): 185-202.

      [50] Lean Yu, Wei Huang, Kin Keung Lai, and Shouyang Wang. "A reliability-based RBF network ensemble model for foreign exchange rates predication." In International Conference on Neural Information Processing, pp. 380-389. Springer, Berlin, Heidelberg, 2006.

      [51] ArashNegahdari Kia, Mohammad Fathian, and M. R. Gholamian. "Using MLP and RBF Neural Networks to Improve the Prediction of Exchange Rate Time Series with ARIMA." International Journal of Information and Electronics Engineering 2, no. 4 (2012): 543.

      [52] G. Sermpinis, K. Theofilatos, A. Karathanasopoulos, E.F. Georgopoulos and C. Dunis, 2013. Forecasting foreign exchange rates with adaptive neural networks using radial-basis functions and particle swarm optimization. European Journal of Operational Research, 225(3), pp.528-540.

      [53] Ajit Kumar Rout and P. K. Dash. "Forecasting foreign exchange rates using hybrid functional link RBF neural network and Levenberg-Marquardt learning algorithm." Intelligent Decision Technologies 10, no. 3 (2016): 299-313.

      [54] Zhaocheng Liu, Ziran Zheng, Xiyu Liu, and Gongxi Wang. "Modelling and Prediction of the CNY Exchange Rate Using RBF Neural Network." In Business Intelligence and Financial Engineering, 2009. BIFE'09. International Conference on, pp. 38-41. IEEE, 2009.

      [55] Minakhi Rout, Babita Majhi, and Usha Manasi Mohapatra. "Efficient long range prediction of exchange rates using Radial Basis Function Neural Network models." In Advances in Engineering, Science and Management (ICAESM), 2012 International Conference on, pp. 530-535. IEEE, 2012.

      [56] Chung‐Ming Kuan and Tung Liu. "Forecasting exchange rates using feedforward and recurrent neural networks." Journal of applied econometrics 10, no. 4 (1995): 347-364.

      [57] Erik. Hulthen. Improving time series prediction using recurrent neural networks and evolutionary algorithms. Chalmers tekniskahögsk, 2004.

      [58] R. Divyapriya, R. ManickaChezhian. “Accurate Forecasting Prediction of Foreign Exchange Rates Using Neural Network Algorithms: A Study”, IJCSMC, Vol. 2, Issue. 7, pp. 344-349, 2013.

      [59] Sanju Singh Saini, Omkar Parkhe, and T. D. Khadtare. "Analysis of Feedforward and Recurrent Neural Network in Forecasting Foreign Exchange Rate." Imperial Journal of Interdisciplinary Research 2, no. 6 (2016).

      [60] Asare, B. K., S. U. Gulumbe, M. Abubakar, and S. Suleiman. "Volatility Forecasting: An application of a Recurrent Dynamic Neural Networks in Nigeria."

      [61] Yuxi Ye. "Study on Exchange Rate Forecasting Using Recurrent Neural Networks." International Journal of Economics, Finance and Management Sciences 5, no. 6 (2017): 300.

      [62] Paolo Tenti. “Forecasting Foreign Exchange Rates Using Recurrent Neural Networks”, Applied Artificial Intelligence, Vol. 10, Issue. 6, pp. 567-582, 1996.

      [63] V. V. Kondratenko, and Yu A. Kuperin. "Using recurrent neural networks to forecasting of forex." arXiv preprint cond-mat/0304469 (2003).

      [64] Mehreen Rehman, Gul Muhammad Khan, and Sahibzada Ali Mahmud. "Foreign currency exchange rates prediction using cgp and recurrent neural network." IERI Procedia 10 (2014): 239-244.




Article ID: 10069
DOI: 10.14419/ijet.v7i2.6.10069

Copyright © 2012-2015 Science Publishing Corporation Inc. All rights reserved.