Analysis of Exchange Rates as Time-Inhomogeneous Markov Chain with Finite States

<div>Plots of probabilities of transitions <svg height="11.5564pt" id="M266" style="vertical-align:-2.26807pt" version="1.1" viewbox="-0.0498162 -9.28833 47.1751 11.5564" width="47.1751pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M300 -147C201 -63 143 98 143 270S200 602 300 686L282 710C136 610 70 450 70 271V270C70 89 136 -72 282 -170L300 -147Z"></path></g><g transform="matrix(.013,0,0,-0.013,4.498,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z"></path></g><g transform="matrix(.013,0,0,-0.013,14.37,0)"><path d="M567 230V280H69V230H567Z"></path></g><g transform="matrix(.013,0,0,-0.013,20.146,0)"><path d="M901 255C861 290 790 361 716 442L694 427L796 280H69V230H796L694 83L716 68C790 149 861 220 901 255Z"></path></g><g transform="matrix(.013,0,0,-0.013,36.257,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z"></path></g><g transform="matrix(.013,0,0,-0.013,42.497,0)"><path d="M275 270C275 450 212 609 64 710L45 686C145 604 203 442 203 270S147 -63 45 -147L64 -170C213 -68 275 89 275 270Z"></path></g></svg> for the study period by exchange rate. Notes: <svg height="11.5564pt" id="M267" style="vertical-align:-2.26807pt" version="1.1" viewbox="-0.0498162 -9.28833 47.1751 11.5564" width="47.1751pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M300 -147C201 -63 143 98 143 270S200 602 300 686L282 710C136 610 70 450 70 271V270C70 89 136 -72 282 -170L300 -147Z"></path></g><g transform="matrix(.013,0,0,-0.013,4.498,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z"></path></g><g transform="matrix(.013,0,0,-0.013,14.37,0)"><path d="M567 230V280H69V230H567Z"></path></g><g transform="matrix(.013,0,0,-0.013,20.146,0)"><path d="M901 255C861 290 790 361 716 442L694 427L796 280H69V230H796L694 83L716 68C790 149 861 220 901 255Z"></path></g><g transform="matrix(.013,0,0,-0.013,36.257,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z"></path></g><g transform="matrix(.013,0,0,-0.013,42.497,0)"><path d="M275 270C275 450 212 609 64 710L45 686C145 604 203 442 203 270S147 -63 45 -147L64 -170C213 -68 275 89 275 270Z"></path></g></svg> means one-step transition frequencies from increase to increase.</div>

Journal of Applied Mathematics

fig1

Figure 1

Figure 1: Analysis of Exchange Rates as Time-Inhomogeneous Markov Chain with Finite States 