A Spectral Decomposition Approach to Separating Independent Factors: The Case of Foreign Exchange Rates
A Spectral Decomposition Approach to Separating Independent Factors: The Case of Foreign Exchange Rates

Summary/Abstract: In this paper, Independent Component Analysis (ICA) is addressed for revealing fundamental factors behind 6 parallel series of foreign exchange rates. ICA is belonging to the blind source separation (BSS) area of research. Each measured signal is considered a mixture of several distinct underlying factors. Separating such fundamental causal factors is very important for multivariate financial time series analysis, in order to explain past co-movements and to predict future evolution.

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