Reducing arbitrage risk by fuzzy regression based prediction of exchange rates for composite currencies

摘要

Some financial instruments are denominated in several currencies rather than a single currency. This increases the volatility in exchange rates as well as the uncertainty in predictability. Therefore, fuzzy axiomatic structure is implemented toincrease both mathematical tractability and physical realism of the problem for composite currency. In this study, we used the theoretical development from our earlier work on fuzzy regression analysis and utilized non-symmetric fuzzy coefficients topredict exchange rate for European Currency Unite (ECU). The significance of the research is in its ability to break newer grounds in the uncertain economic environment. The simulation results highlight both the timeliness and the efficiency of theproposed model.