All ETDs from UAB

Advisory Committee Chair

Ian W Knowles

Advisory Committee Members

Shangbing Ai

Marius N Nkashama

Roger B Sidje

Chengcui Zhang

Document Type

Dissertation

Date of Award

2020

Degree Name by School

Doctor of Philosophy (PhD) College of Arts and Sciences

Abstract

Catastrophic economic events like the oil price shock in 1973, the 9/11 event in 2001, the stock market crash in October, 1987, the financial crash of late 2008 and the Covid-19 epidemic impact the US economy without warning, with varying effect, from sharp downturns to actual market crashes. Current economic theory and the associated statistical models are not able to predict these events. The development of predictive models for the US economy needs at the very least prediction models for its major components: commodities, stocks, bonds and currencies. I am going to model the currency exchange rates using a stochastic differential equation model by predicting the exchange rate trend using a system of delay differential equations, and recovering the future volatility of exchange rates by solving an inverse problem obtained from the Garman-Kohlhagen partial differential equation for foreign exchange options.

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