A cyclical model of exchange rate volatility
In this paper, we investigate the long run dynamics of the intraday range of the GBP/USD, JPY/USD and CHF/USD exchange rates. We use a non-parametric filter to extract the low frequency component of the intraday range, and model the cyclical deviation of the range from the long run trend as a statio...
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| Veröffentlicht in: | Journal of banking & finance 2011-11, Vol.35 (11), p.3055-3064 |
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| container_title | Journal of banking & finance |
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| creator | Harris, Richard D.F. Stoja, Evarist Yilmaz, Fatih |
| description | In this paper, we investigate the long run dynamics of the intraday range of the GBP/USD, JPY/USD and CHF/USD exchange rates. We use a non-parametric filter to extract the low frequency component of the intraday range, and model the cyclical deviation of the range from the long run trend as a stationary autoregressive process. We use the cyclical volatility model to generate out-of-sample forecasts of exchange rate volatility for horizons of up to 1
year under the assumption that the long run trend is fully persistent. As a benchmark, we compare the forecasts of the cyclical volatility model with those of the range-based EGARCH and FIEGARCH models of
Brandt and Jones (2006). Not only does the cyclical volatility model provide a very substantial computational advantage over the EGARCH and FIEGARCH models, but it also offers an improvement in out-of-sample forecast performance. |
| doi_str_mv | 10.1016/j.jbankfin.2011.04.007 |
| format | Article |
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year under the assumption that the long run trend is fully persistent. As a benchmark, we compare the forecasts of the cyclical volatility model with those of the range-based EGARCH and FIEGARCH models of
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year under the assumption that the long run trend is fully persistent. As a benchmark, we compare the forecasts of the cyclical volatility model with those of the range-based EGARCH and FIEGARCH models of
Brandt and Jones (2006). Not only does the cyclical volatility model provide a very substantial computational advantage over the EGARCH and FIEGARCH models, but it also offers an improvement in out-of-sample forecast performance.</description><subject>Conditional volatility</subject><subject>Conditional volatility Intraday range Non-parametric filter</subject><subject>Economic forecasting</subject><subject>Exchange rates</subject><subject>Financial models</subject><subject>Foreign exchange rates</subject><subject>GARCH models</subject><subject>Intraday range</subject><subject>Non-parametric filter</subject><subject>Stochastic models</subject><subject>Studies</subject><subject>Volatility</subject><issn>0378-4266</issn><issn>1872-6372</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2011</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><recordid>eNqFkE1r3DAQhkVoodskf6GYXnKp3Rl92b41hPQDEnJpzkKWxolcr72VvEv230ebbXPopQMzEszzvgwvYx8QKgTUn4dq6Oz0qw9TxQGxAlkB1CdshU3NSy1q_oatQNRNKbnW79j7lAbI1aBYsU-Xhdu7MTg7FuvZ01jMfUFP7tFOD1REu1Cxm0e7hDEs-zP2trdjovM_7ym7_3r98-p7eXP37cfV5U3plOJLKbzrWkWddSihb7xXklrE2nqQvIGOnO6RdzX0jpPyqBrQ2nPbe9l6rFGcsouj7ybOv7eUFrMOydE42onmbTJNqwFb1fBMfvyHHOZtnPJxGZKgUOiDnT5CLs4pRerNJoa1jXuDYA4RmsH8jdAcIjQgTY4wC2-Pwkgbcq8qIhq6zFqzM8IKlcc-94tS2JD75bM5LEHlNWhpHpd19vty9KMc3i5QNMkFmhz5EMktxs_hfyc9A8zflZY</recordid><startdate>20111101</startdate><enddate>20111101</enddate><creator>Harris, Richard D.F.</creator><creator>Stoja, Evarist</creator><creator>Yilmaz, Fatih</creator><general>Elsevier B.V</general><general>Elsevier</general><general>Elsevier Sequoia S.A</general><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20111101</creationdate><title>A cyclical model of exchange rate volatility</title><author>Harris, Richard D.F. ; Stoja, Evarist ; Yilmaz, Fatih</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c552t-3dcb95ebac140f8dd54e9117ad04280bec6f12b70fc2e5d158066d2afd49d1713</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2011</creationdate><topic>Conditional volatility</topic><topic>Conditional volatility Intraday range Non-parametric filter</topic><topic>Economic forecasting</topic><topic>Exchange rates</topic><topic>Financial models</topic><topic>Foreign exchange rates</topic><topic>GARCH models</topic><topic>Intraday range</topic><topic>Non-parametric filter</topic><topic>Stochastic models</topic><topic>Studies</topic><topic>Volatility</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Harris, Richard D.F.</creatorcontrib><creatorcontrib>Stoja, Evarist</creatorcontrib><creatorcontrib>Yilmaz, Fatih</creatorcontrib><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of banking & finance</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Harris, Richard D.F.</au><au>Stoja, Evarist</au><au>Yilmaz, Fatih</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>A cyclical model of exchange rate volatility</atitle><jtitle>Journal of banking & finance</jtitle><date>2011-11-01</date><risdate>2011</risdate><volume>35</volume><issue>11</issue><spage>3055</spage><epage>3064</epage><pages>3055-3064</pages><issn>0378-4266</issn><eissn>1872-6372</eissn><coden>JBFIDO</coden><abstract>In this paper, we investigate the long run dynamics of the intraday range of the GBP/USD, JPY/USD and CHF/USD exchange rates. We use a non-parametric filter to extract the low frequency component of the intraday range, and model the cyclical deviation of the range from the long run trend as a stationary autoregressive process. We use the cyclical volatility model to generate out-of-sample forecasts of exchange rate volatility for horizons of up to 1
year under the assumption that the long run trend is fully persistent. As a benchmark, we compare the forecasts of the cyclical volatility model with those of the range-based EGARCH and FIEGARCH models of
Brandt and Jones (2006). Not only does the cyclical volatility model provide a very substantial computational advantage over the EGARCH and FIEGARCH models, but it also offers an improvement in out-of-sample forecast performance.</abstract><cop>Amsterdam</cop><pub>Elsevier B.V</pub><doi>10.1016/j.jbankfin.2011.04.007</doi><tpages>10</tpages><oa>free_for_read</oa></addata></record> |
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| ispartof | Journal of banking & finance, 2011-11, Vol.35 (11), p.3055-3064 |
| issn | 0378-4266 1872-6372 |
| language | eng |
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| source | RePEc; Elsevier ScienceDirect Journals Complete |
| subjects | Conditional volatility Conditional volatility Intraday range Non-parametric filter Economic forecasting Exchange rates Financial models Foreign exchange rates GARCH models Intraday range Non-parametric filter Stochastic models Studies Volatility |
| title | A cyclical model of exchange rate volatility |
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