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Using Short Time Series of Monofractal Synthetic Fluctuations to Estimate the Foreign Exchange Rate: The Case of the US Dollar and the Chilean Peso (USD–CLP)

Author

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  • Juan L. López

    (Centro de Innovación en Ingeniería Aplicada, Universidad Católica del Maule, Av. San Miguel 3605, Talca 3460000, Chile)

  • David Morales-Salinas

    (Department of Computer Science and Industries, Universidad Católica del Maule, Av. San Miguel 3605, Talca 3460000, Chile)

  • Daniel Toral-Acosta

    (Facultad de Ciencias Físico-Matemáticas, Universidad Autónoma de Nuevo León, Pedro de Alba S/N, Ciudad Universitaria, San Nicolás de los Garza 66455, Mexico)

Abstract

Short time series are fundamental in the foreign exchange market due to their ability to provide real-time information, allowing traders to react quickly to market movements, thus optimizing profits and mitigating risks. Economic transactions show a strong connection to foreign currencies, making exchange rate prediction challenging. In this study, the exchange rate estimation between the US dollar (USD) and the Chilean peso (CLP) for a short period, from 2 August 2021 to 31 August 2022, is modeled using the nonlinear Schrödinger equation (NLSE) and calculated with the fourth-order Runge–Kutta method, respectively. Additionally, the daily fluctuations of the current exchange rate are characterized using the Hurst exponent, H , and later used to generate short synthetic fluctuations to predict the USD–CLP exchange rate. The results show that the USD–CLP exchange rate can be estimated with an error of less than 5 % , while when using short synthetic fluctuations, the exchange rate shows an error of less than 10 % .

Suggested Citation

  • Juan L. López & David Morales-Salinas & Daniel Toral-Acosta, 2024. "Using Short Time Series of Monofractal Synthetic Fluctuations to Estimate the Foreign Exchange Rate: The Case of the US Dollar and the Chilean Peso (USD–CLP)," Economies, MDPI, vol. 12(10), pages 1-15, October.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:10:p:269-:d:1492160
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    References listed on IDEAS

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    1. Ladislav Kristoufek, 2012. "Fractal Markets Hypothesis And The Global Financial Crisis: Scaling, Investment Horizons And Liquidity," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 15(06), pages 1-13.
    2. Zhi-Qiang Jiang & Wen-Jie Xie & Wei-Xing Zhou & Didier Sornette, 2018. "Multifractal analysis of financial markets," Papers 1805.04750, arXiv.org.
    3. Sebastián Claro & Claudio Soto, 2013. "Exchange rate policy and exchange rate interventions: the Chilean experience," BIS Papers chapters, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 81-93, Bank for International Settlements.
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