Predicting movements in foreign currency rates using simulation modelling

Financial modelling is extensively used in all sectors of today’s business environments. In particular, it is used as a tool in the preparation of plans, budgets and many corporate projections. Simulation modelling is not widely used in this area, although it is popular and used in other areas such as manufacturing, health services and traffic management. This paper addresses financial modelling and, more specifically, simulation modelling in the financial arena. The main objective of the research was to provide a support for the foreign exchange dealer in predicting future movements in foreign currency rates. Following an analysis of trend factors and technical analysis the findings of the research resulted in the construction of a simulation model, which is used in an international bank.