August 2023 issue contents
FUZZIFIED PORTFOLIO CLASSIFICATION USING OPSFXR APPROACH

Challa Madhavi latha1, Dr. S. Bhuvaneswari2, Dr. K.L.S. Soujanya3

Abstract

The foreign exchange (FOREX) market stands as the largest financial market worldwide, witnessing daily trades exceeding $5 trillion. Engaging in buying and selling within this market depends on critical factors, making the endeavor riskier and more challenging. Forecasting multiple FOREX time series is an area of intense focus in academic literature related to portfolio trading. To address this, a highly efficient portfolio for foreign currency has been proposed through the Optimized Portfolio Selection for FOREX Rates (OPSFXR) approach. This method empowers investors to select the most suitable foreign currency for their investments, leading to variable returns aligned with their preferences. Furthermore, this research introduces an enhanced automated trading system for the Forex market using fuzzy rule-based evidential reasoning. The methodology leverages fuzzy sets within the context of the evidence theory, effectively overcoming issues with operational laws and enhancing overall performance. To validate the suggested approach, actual data from the Reserve Bank of India (RBI) has been utilized, explicitly focusing on the Indian Rupee (INR) currency pairing with 18 other currencies, including the British pound (GBP), Euro (EUR), US dollar (USD), Canadian dollar (CAD), Swiss franc (CHF), Japanese yen (JPY), Danish Kroner (DKK), Swedish Kroner (SEK), Norwegian Kroner (NOK), New Zealand dollar (NZD), Australian dollar (AUD), Singapore Dollar (SGD), Hong Kong Dollar (HKD), Thai Baht (THB), Indonesian Rupiah (IDR), South Korean Won (KRW), Chinese Yuan (CNY), and UAE Dirham (AED). The testing spanned over ten years, from 1st April 2012 to 31st March 2022. The data showcased the effectiveness of the suggested approach and the identification of fuzzy sets for portfolio classification. This research represents a significant advancement in optimizing Forex trading strategies and risk management techniques.

Keywords:Fuzzy sets, Foreign Exchange rate, Portfolio, Trend analysis, GARCH(1,1), Risk, Return on Investment, Investors