The Discrete Multicriteria Decision Methods And ARSV Model Used To Choice The Best Exchange Rate

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Maria del Carmen Garcia-Centeno
Roman Minguez Salido

Keywords

Exchange rate, ARSV model, Stochastic volatility, Discrete Multicriteria Methods

Abstract

The exchange rate is a variable that economic agents have in consideration. For this reason, in this paper we suggest a decision method to compare several exchange rates. This method is the Promethee Method and it is a Multicriteria Decision Method used to order the preference between returns of the different exchange rates. We have used different statistic criteria to rank these exchange rates. To obtain the pay-off matrix it has been used one econometric model: Autoregressive Stochastic Volatility (ARSV) Model. We have proposed different generalized criteria and their corresponding thresholds. Both are used to evaluate the different exchange rate returns in the decision matrix or the pay-off matrix. These thresholds are suggested according to the obtained results in the decision matrix. Finally, we have obtained the best solution of the problem when all the criteria have the same importance for the decision-maker.

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