The Application of Artificial Neural Networks to Exchange Rate Forecasting: The Role of Market Microstructure VariablesArtificial neural networks (ANN) are employed for high-frequency Canada/U.S. dollar exchange rate forecasting. ANN outperform random walk and linear models in a number of recursive out-of- sample forecasts.
Extreme value theory (EVT) has been applied in fields such as hydrology and insurance. It is a tool used to consider probabilities associated with extreme and thus rare events. EVT is useful in modelling the impact of crashes or situations of extreme stress on investor portfolios.