THE ALUMINIUM PRICE FORECASTING BY REPLACING THE INITIAL CONDITION VALUE BY THE DIFFERENT STOCK EXCHANGES

Abstract

In mathematical models, for forecasting prices on commodity exchanges different mathematical methods are used. In the paper the numerical model based on the exponential approximation of commodity stock exchanges was derived. The price prognoses of aluminium on the London Metal Exchange were determined as numerical solution of the Cauchy initial problem for the 1st order ordinary differential equation. To make the numerical model more accurate the idea of the modification of the initial condition value by the aluminium price (stock exchange) was realised. The derived numerical model was verified by determining the influence of the length of the initial condition drift on the accuracy of the obtained prognoses. The types of the initial condition drift during different movements of aluminium prices were studied. The most accurate prognoses were the most often obtained by using the longest initial condition drift. In this type of drift the initial condition value was replaced by aluminium stock exchange in the month in which the absolute percentage error of the prognosis had at least selected value. The advantage of this drift was manifested especially in the stable price course and within larger changes in prices. If there was price fluctuating within the observing period, in the next forecasting the most accurate was the drift the initial condition value of which had been replaced by the price that was the nearest to the stock exchange price evolution.