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Modeling and forecasting exchange rate volatility in time-frequency domain
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SYSNO ASEP 0456184 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Modeling and forecasting exchange rate volatility in time-frequency domain Author(s) Baruník, Jozef (UTIA-B) RID, ORCID
Křehlík, Tomáš (UTIA-B)
Vácha, Lukáš (UTIA-B) RIDNumber of authors 3 Source Title European Journal of Operational Research. - : Elsevier - ISSN 0377-2217
Roč. 251, č. 1 (2016), s. 329-340Number of pages 12 s. Publication form Print - P Language eng - English Country NL - Netherlands Keywords Realized GARCH ; Wavelet decomposition ; Jumps ; Multi-period-ahead volatility forecasting Subject RIV AH - Economics R&D Projects GA13-32263S GA ČR - Czech Science Foundation (CSF) Institutional support UTIA-B - RVO:67985556 UT WOS 000369473300030 EID SCOPUS 84955063029 DOI 10.1016/j.ejor.2015.12.010 Annotation 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 general- ized autoregressive score. We compare forecasts using several popular realized volatility measures on foreign exchange rate futures data covering the recent financial crisis. Workplace Institute of Information Theory and Automation Contact Markéta Votavová, votavova@utia.cas.cz, Tel.: 266 052 201. Year of Publishing 2017
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