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SVM Based Analysis of Indian Rupee Strength
IV. EXPERIMENT
II. PROPOSED SOLUTION
A. Selection of Data
We have considered daily data from 1st January 2000 to 11th
March 2015. In all there are around 29000 values we are
working with. The exchange rate data was obtained from the
Reserve bank of India (RBI) website archives and the database
of the features was obtained from the Bombay Stock Exchange
(BSE) website archives. This data was saved in Excel files.
B. Cleaning of Data
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International Journal of Engineering and Technical Research (IJETR)
ISSN: 2321-0869 (O) 2454-4698 (P), Volume-3, Issue-11, November 2015
EMA Formula: 1 Y p 1 Y1 Y p 2 Y2 Y p p Y p
The calculation formula is more complex then that for an SMA: bp
1. Choose a price setting assume closing price;
p p p p
2. Choose a period setting assume 10 for example;
3. Calculate the Smoothing Factor = SF = 2/(1 + 10);
4. New EMA value = SF X New Price + (1- SF) X Previous
s1 Y1 a p , s2 Y2 a p , , s p Yp a p
EMA value.
The Holt-Winters forecasts are then calculated using the latest
c) HOLT WINTERS ALGORITHM estimates from the appropriate exponential smooth that have
Often, time series data display behavior that is seasonal. been applied to the series [2]
Seasonality is defined to be the tendency of time-series data to
exhibit behavior that repeats itself every L periods. The term D. Currency Value Fluctuation Evaluation
season is used to represent the period of time before behavior
begins to repeat itself. L is therefore the season length in periods. In the second part of our project, once we have predicted which
For example, annual sales of toys will probably peak in the currency is going to have maximum volatility, it is important to
months of November and December, and perhaps during the know what direction the price is going to move in. it means that
summer (with a much smaller peak). This pattern is likely to the user needs to know whether the value of the currency
repeat every year, however, the relative amount of increase in compared to INR is going to go up or down. This is done using
sales during December may slowly change from year to year. Support Vector Machine Algorithm (SVM). Here we consider
For example, during the month of December the sales for a different macroeconomic factors like- BSE Index, Oil Prices,
particular toy may increase by 1 million dollars every year. Thus, Gold, and Commodities. We believe that these factors affect the
we could add to our forecasts for every December the amount of exchange rate of INR the most. In typical setting of
1 million dollars (over the respective annual average) to account Classification problem, we'd be given some red dots and some
for this seasonal fluctuation. In this case, the seasonality is blue dots in some space and we'd be required to find out a curve
additive. Alternatively, during the month of December the sales (called separating boundary) that can separate all blue dots from
for a particular toy may increase by 40%, that is, increase by a all red dots.
factor of 1.4. Thus, when the sales for the toy are generally weak, As it turns out, it is much easier and efficient to find out
then the absolute (dollar) increase in sales during December will boundaries which are in the form of a straight line (or an
be relatively weak (but the percentage will be constant); if the analogous construct in higher dimensions called hyper plane)
sales of the toy are strong, then the absolute (dollar) increase in compared to curvy boundaries. Hyper-plane is just a
sales will be proportionately greater. Again, in this case the sales generalization of a line in 2D and plane in 3D. SVMs help us to
increase by a certain factor, and the seasonal component is thus find a hyper plane that can separate red and blue dots.
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SVM Based Analysis of Indian Rupee Strength
The SVM kernels can roughly be divided into linear kernels and how the free parameters for the SVM are selected, perhaps by an
non linear kernels. alternative computational intelligence method. This would
The most commonly used kernels for the SVM are the d-degree require further research on the topic that points to the direction
polynomial kernel with the linear kernel for d=1, the radial basis of genetic algorithms in combination with SVMs.
function (RBF) kernel, also known as the Gaussian kernel, and
the sigmoid kernel. These kernels have been shown before, and ACKNOWLEDGMENT
are again listed below. The first kernel is a linear kernel, while
the other three kernels are nonlinear. We, hereby take this opportunity to thank all those who have
helped us in making this paper a success. We would also like to
thank Dr. Narendra Shekokar, HOD, Computer Science
V. RESULTS Department, D.J.Sanghvi College of Engineering and Dr. Hari
Vasudevan, Principal, D.J.Sanghvi College of Engineering for
As we have seen, SVM is a classification algorithm that can be giving us the necessary facilities in the college without which
applied to the problem at hand as it can classify non-linearly this would not have been possible.
also. The negative aspect is the time complexity specially when
we consider the last 100 days. The RBF kernel is observed to REFERENCES
have the maximum accuracy compared to Linear and
[1] Kamruzzaman, J, Sarker R.A, Ahmad I. SVM based models for
Polynomial. As far as prediction for volatility is concerned. Holt predicting foreign currency exchange rates, Data Mining, 2003. ICDM 2003.
Winters is the most accurate method. Though a lot remains to be Third IEEE International Conference, Nov 2003.
done in terms of selection of parameters. [2] Prajakta S. Kalekar, Time series forecasting using Holt-Winters
Exponential Smoothing, Dec 2004,
[3] Piyush Dharnidharka. Forecasting Foreign Currency Exchange Data
using SVM Based Models, Academia.edu, 2012.
Fig 5 : Volatility of the 4 currencies (In clockwise direction from top left : USD,
EURO,YEN and GBP with YEN showing the maximum volatility)
VI. CONCLUSION
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