Modeling and forecasting exchange rate volatility in time-frequency domain
From MaRDI portal
(Redirected from Publication:322677)
Abstract: This paper proposes an enhanced approach to modeling and forecasting volatility using high frequency data. Using a forecasting model based on Realized GARCH with multiple time-frequency decomposed realized volatility measures, we study the influence of different timescales on volatility forecasts. The decomposition of volatility into several timescales approximates the behaviour of traders at corresponding investment horizons. The proposed methodology is moreover able to account for impact of jumps due to a recently proposed jump wavelet two scale realized volatility estimator. We propose a realized Jump-GARCH models estimated in two versions using maximum likelihood as well as observation-driven estimation framework of generalized autoregressive score. We compare forecasts using several popular realized volatility measures on foreign exchange rate futures data covering the recent financial crisis. Our results indicate that disentangling jump variation from the integrated variation is important for forecasting performance. An interesting insight into the volatility process is also provided by its multiscale decomposition. We find that most of the information for future volatility comes from high frequency part of the spectra representing very short investment horizons. Our newly proposed models outperform statistically the popular as well conventional models in both one-day and multi-period-ahead forecasting.
Recommendations
- Modeling and Forecasting Realized Volatility
- Forecasting foreign exchange realized volatility: a least square model averaging approach
- The Volatility of Realized Volatility
- A factor approach to realized volatility forecasting in the presence of finite jumps and cross-sectional correlation in pricing errors
- Forecasting exchange rate volatility.
Cites work
- scientific article; zbMATH DE number 52869 (Why is no real title available?)
- scientific article; zbMATH DE number 1380579 (Why is no real title available?)
- A Tale of Two Time Scales
- A discontinuous mispricing model under asymmetric information
- A fast calibrating volatility model for option pricing
- A new wavelet-based denoising algorithm for high-frequency financial data mining
- A reduced form framework for modeling volatility of speculative prices based on realized variation measures
- An introduction to wavelets and other filtering methods in finance and economics
- Analysis of Subtidal Coastal Sea Level Fluctuations Using Wavelets
- Common volatility and correlation clustering in asset returns
- Contagion around the October 1987 stock market crash
- Daily FX volatility forecasts: can the GARCH(1,1) model be beaten using high-frequency data?
- De-noising option prices with the wavelet method
- Econometric Analysis of Realized Volatility and its Use in Estimating Stochastic Volatility Models
- Forecasting the volatility of crude oil futures using intraday data
- Ideal spatial adaptation by wavelet shrinkage
- Jump and sharp cusp detection by wavelets
- Jump-robust volatility estimation using nearest neighbor truncation
- Modeling and Forecasting Realized Volatility
- Multi-Scale Jump and Volatility Analysis for High-Frequency Financial Data
- Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics. (With discussion)
- Optimizing bounds on security prices in incomplete markets. Does stochastic volatility specification matter?
- Patterns in stock market movements tested as random number generators
- Realized Volatility: A Review
- Realized wavelet-based estimation of integrated variance and jumps in the presence of noise
- Statistical Properties and Uses of the Wavelet Variance Estimator for the Scale Analysis of Time Series
- Stochastic volatility as a simple generator of apparent financial power laws and long memory
- Ten Lectures on Wavelets
- The Distribution of Realized Exchange Rate Volatility
- The Model Confidence Set
- The role of high-frequency intra-daily data, daily range and implied volatility in multi-period value-at-risk forecasting
- Variance swap with mean reversion, multifactor stochastic volatility and jumps
- Volatility forecast comparison using imperfect volatility proxies
- Wavelets and stochastic processes
- Wavelets in Economics and Finance: Past and Future
Cited in
(21)- Forecasting foreign exchange realized volatility: a least square model averaging approach
- Forecasting the realized variance of the log-return of Korean won US dollar exchange rate addressing jumps both in stock-trading time and in overnight
- A practical multivariate approach to testing volatility spillover
- A neural network enhanced volatility component model
- Fat tails, serial dependence, and implied volatility index connections
- Volatility forecasting of financial time series using wavelet based exponential generalized autoregressive conditional heteroscedasticity model
- Co-jumping of treasury yield curve rates
- Modeling and forecasting realized volatility in German-Austrian continuous intraday electricity prices
- Forecasting exchange rate volatility using conditional variance models selected by information criteria
- New evidence on market response to public announcements in the presence of microstructure noise
- Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crisis
- Modelling and forecasting by wavelets, and the application to exchange rates
- The continuous-time limit of score-driven volatility models
- Forecasting volatility returns of oil price using gene expression programming approach.
- MODELING HIGH-FREQUENCY FOREIGN EXCHANGE DATA DYNAMICS
- A wavelet-based approach for modelling exchange rates
- Estimation of long memory in volatility using wavelets
- Modelling exchange rate volatility
- Exchange rate forecasting with optimum singular spectrum analysis
- scientific article; zbMATH DE number 7159541 (Why is no real title available?)
- Option pricing with conditional GARCH models
This page was built for publication: Modeling and forecasting exchange rate volatility in time-frequency domain
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q322677)
