DRQ #12 – November 15, 2011
DRQ12 is worth 5 pts
1. Suppose we wish to analyze the Japanese Yen to U.S.
dollar exchange rate. The exchange rate deals with the
number of Yen per U.S. dollar. Let YenUS(t) represent
the Japanese Yen to U.S. dollar exchange rate in time
period t.
Suppose that: YenUS(t) = -50 + 1.2YenUS(t -1) +
0.4YenUS(t – 2)
(1pt) (a) What is the technical name of this model
representation?
(2pts) (b) Suppose that Yen to U.S. dollar exchange rates
for September 2011 and October 2011 were 90 and 80
respectively. Forecast the exchange rate for November
2011.
(2pts) 2. In general, list two forecast accuracy criteria
you would use in choosing between MA models and AR
models.