Testing the martingales property of daily exchange rate

Predictable Representation Property of Some Hilbertian Martingales

We prove as for the real case that a martingale with values in a separabale real Hilbert space is extremal if and only if it satisfies the predictable representation property.

The Appropriate Exchange Rate System and the Regulation and Forecast of Exchange Rate for Iran's Economy

Daily Exchange Rate Behaviour and Hedging of Currency Risk

Exchange rates typically exhibit time-varying patterns in both means and variances. The histograms of such series indicate heavy tails. In this paper we construct models which enable a decision-maker to analyze the implications of such time series patterns for currency risk management. Our approach is Bayesian where extensive use is made of Markov chain Monte Carlo methods. The e ects of severa...

On the Martingale Property of Certain Local Martingales

The stochastic exponential Zt = exp{Mt − M0 − (1/2)〈M,M〉t} of a continuous local martingale M is itself a continuous local martingale. We give a necessary and sufficient condition for the process Z to be a true martingale in the case where Mt = R t 0 b(Yu) dWu and Y is a one-dimensional diffusion driven by a Brownian motion W . Furthermore, we provide a necessary and sufficient condition for Z ...

Chartist Prediction in the Foreign Exchange Market Evidence from the Daily Dollar/DM Exchange Rate

In this study a regime switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The empirical results suggest that this model does successfully explain daily DM/Dollar forward exchange rate dynamics from 1982 to 1998. Moreover, our findings turned out to be relative robust by estimating the model in subs...