The EUR/CHF Exchange Rate: Drivers, Forecasting, and Trading Strategies

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Type and Duration

PhD-Thesis, since September 2018

Coordinator

Chair in Finance

Main Research

Wealth Management

Field of Research

Behavioural Finance

Description

From the perspective of a relatively small and highly export-oriented Swiss economy, the level of exchange rates plays an important role for economic growth. The strong appreciation of the Swiss franc against the euro in the aftermath of the global financial crisis, when it almost reached parity on August 11, 2011, significantly threatened local exporters in Switzerland and Liechtenstein by limiting their competitiveness in relation to Switzerland's main trading partners. As a result, on September 6, 2011, the Swiss National Bank (SNB) introduced a minimum exchange rate of 1.20 Swiss francs per euro with a commitment to purchasing unlimited amounts of euro-denominated assets to maintain this rate, without specifying a time frame for this policy. In addition to foreign currency interventions and piling up substantial amounts of assets in foreign currency, the SNB has also adopted an approach of negative interest rates. The strict exchange rate floor was maintained until January 15, 2015, when the SNB dropped the policy as unexpectedly as it had been introduced in September 2011.

The objective of this paper-based dissertation is to analyze drivers of the EUR/CHF exchange rate using different methods, including Machine Learning and Artificial Intelligence, and to design trading strategies based on the empirical findings.

Keywords

Artificial Intelligence, FX trading, EUR/CHF exchange rate, Foreign currency interventions