This project provides a simple, yet comprehensive approach to predicting movements in the exchange rate between the Euro and the U.S. Dollar through the development of a linear regression model and further fitting the errors by using momentum signals. The predictions generated are compared to the forward rates in order to develop a hedging strategy for deciding when to use a forward contract or wait to use the spot exchange rate. Finally, we analyze the payoffs obtained by using this strategy.
Worcester Polytechnic Institute
Major Qualifying Project
All authors have granted to WPI a nonexclusive royalty-free license to distribute copies of the work, subject to other agreements. Copyright is held by the author or authors, with all rights reserved, unless otherwise noted.