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Euro Exchange Rate Forecasting with Differential Neural Networks with an Extended Tracking Procedure

Author

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  • Ortiz-Arango, Francisco
  • Cabrera-Llanos, Agustín I.
  • Venegas-Martínez, Francisco

Abstract

This paper is aimed at developing a new kind of non-parametrical artificial neural network useful to forecast exchange rates. To do this, we departure from the so-called Differential or Dynamic neural Networks (DNN) and extend the tracking procedure. Under this approach, we examine the daily closing values of the exchange rates of the Euro against the US dollar, the Japanese yen and the British pound. With our proposal, Extended DNN or EDNN, we perform the tracking procedure from February 15, 1999, to August 31, 2013, and, subsequently, the forecasting procedure from September 2 to September 13, 2013. The accuracy of the obtained results is remarkable, since the percentage of the error in the predicted values is within the range from 0.001% to 0.69% in the forecasting period.

Suggested Citation

  • Ortiz-Arango, Francisco & Cabrera-Llanos, Agustín I. & Venegas-Martínez, Francisco, 2014. "Euro Exchange Rate Forecasting with Differential Neural Networks with an Extended Tracking Procedure," MPRA Paper 57720, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57720
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    References listed on IDEAS

    as
    1. Lean Yu & Shouyang Wang & Kin Keung Lai, 2007. "Foreign-Exchange-Rate Forecasting With Artificial Neural Networks," International Series in Operations Research and Management Science, Springer, number 978-0-387-71720-3.
    2. G P Zhang & V L Berardi, 2001. "Time series forecasting with neural network ensembles: an application for exchange rate prediction," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(6), pages 652-664, June.
    3. Christian Dunis & Jason Laws & Georgios Sermpinis, 2010. "Modelling and trading the EUR/USD exchange rate at the ECB fixing," The European Journal of Finance, Taylor & Francis Journals, vol. 16(6), pages 541-560.
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    More about this item

    Keywords

    Exchange rates; artificial neural network; differential neural network; tracking and forecasting.;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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