Date of Award

3-26-2015

Document Type

Thesis

Degree Name

Master of Science in Cost Analysis

Department

Department of Systems Engineering and Management

First Advisor

Jonathan D Ritschel, PhD.

Abstract

This thesis examines the current method of forecasting foreign currency exchange rates for the annual US Air Force budget. Using 5 methods against the status quo of a center-weighted average, the paper evaluates the absolute percent error (APE) over three time periods extending from Fiscal Year (FY) 1979 to FY 2014. The results strongly indicate that four of the alternative methods outperform over the short term, and one method for all three time periods. Furthermore, a non-parametric comparison of the median APE demonstrates statistical similarities between the four methods over the short term, and allows for the Air Force to choose which method to exercise for future forecasting. Overall, the paper recommends using a private firm s forecasts to decrease the median APE by 3.36% and avoiding $36.1 million opportunity cost.

AFIT Designator

AFIT-ENV-MS-15-M-178

DTIC Accession Number

ADA615405

Included in

Business Commons

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