communication: INTEREST RATES... : Exchange Rate Volatility Forecasting: a Multivariate Realized-GARCH Approach
speaker: Janine Balterspeaker: Elena Dumitrescu
speaker: Peter Hansen
abstract: We propose a model of exchange rates that jointly models associated realized measures of volatility and covariances within the Realized GARCH framework. The proposed model exploits identities arising from no arbitrage conditions, that facilitates a relatively parsimonious modeling of a panel of exchange rates. The model shares the simplicity of GARCH models while taking advantage of realized volatility measures that are computed from highfrequency (intraday) data. The latter leads to a better modeling of the variances and covariances, by providing a flexible modeling of their dynamic properties. The model easily produce forecasts at any horizon. The model is illustrated with an empirical application for exchange rates between the currencies: EUR, USD and JPY. An outofsample comparison shows that the proposed model dominates conventional benchmark models, in particular at shorter horizons.
timetable:
Thu 28 Jan, 11:00 - 13:00, Sala Azzurra
<< Go back