Download or read book Forecasting Implied Volatility in Foreign Exchange Markets written by Fearghal Kearney and published by . This book was released on 2016 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We utilise functional time series (FTS) techniques to characterise and forecast implied volatility in foreign exchange markets. In particular, we examine the daily implied volatility curves of FX options, namely; EUR-USD, EUR-GBP, and EUR-JPY. Based on existing techniques in the literature, the FTS model is shown to produce both realistic and plausible implied volatility shapes that closely match empirical data during the volatile 2006-2013 period. Furthermore, the FTS model significantly outperforms implied volatility forecasts produced by traditionally employed parametric models. The evaluation is performed under both an in-sample and out-of-sample testing framework with our fi ndings shown to be robust across various currencies, moneyness segments, contract maturities, forecasting horizons, and out-of-sample window lengths. The economic signi cance of the results is highlighted through the implementation of a simple trading strategy.

Download or read book Forecasting Volatility in the Financial Markets written by John Knight and published by Butterworth-Heinemann. This book was released on 1998 with total page 376 pages. Available in PDF, EPUB and Kindle. Book excerpt: An aid to understanding the significance of volatility in the financial market, this text details modelling/forecasting techniques and uses a technical survey to define the models of volatility and return and explain the ways to measure risk. Applications in the financial markets are then detailed.

Download or read book Forecasting Volatility in the Financial Markets written by Stephen Satchell and published by Elsevier. This book was released on 2011-02-24 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: Forecasting Volatility in the Financial Markets, Third Edition assumes that the reader has a firm grounding in the key principles and methods of understanding volatility measurement and builds on that knowledge to detail cutting-edge modelling and forecasting techniques. It provides a survey of ways to measure risk and define the different models of volatility and return. Editors John Knight and Stephen Satchell have brought together an impressive array of contributors who present research from their area of specialization related to volatility forecasting. Readers with an understanding of volatility measures and risk management strategies will benefit from this collection of up-to-date chapters on the latest techniques in forecasting volatility. Chapters new to this third edition:* What good is a volatility model? Engle and Patton* Applications for portfolio variety Dan diBartolomeo* A comparison of the properties of realized variance for the FTSE 100 and FTSE 250 equity indices Rob Cornish* Volatility modeling and forecasting in finance Xiao and Aydemir* An investigation of the relative performance of GARCH models versus simple rules in forecasting volatility Thomas A. Silvey - Leading thinkers present newest research on volatility forecasting - International authors cover a broad array of subjects related to volatility forecasting - Assumes basic knowledge of volatility, financial mathematics, and modelling

Download or read book The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange Stock and Bond Markets written by and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Are Option implied Forecasts of Exchange Rate Volatility Excessively Variable written by Shang-Jin Wei and published by . This book was released on 1991 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Market participants' forecasts of future exchange rate volatility can be recovered from option contracts on foreign currencies. Such implicit volatility forecasts for four currencies are used to test rational expectations jointly with the applicability of the standard Black-Scholes formula. First, we examine the null hypothesis that the market-anticipated one-month-ahead standard deviation is an unbiased estimator of the subsequent realized standard deviation. The parametric regression method rejects this hypothesis overwhelmingly: the implicit forecasts are themselves excessively variable. Simulations indicate that the rejection is not caused by non-normality of the error term. Second, we use a nonparametric method to test a weaker version of market rationality: the market can correctly forecast the direction of the change in exchange rate volatility. This time, the weaker version of rationality is confirmed- Third, we investigate how market forecasts are formed. We find some evidence that market participants put heavy weight on lagged volatility when forecasting future volatility. Finally, results from the Alternating Conditional Expectations algorithm provide further support for the central finding that when the market predicts a large deviation of volatility from its mean, it could do better by moderating its forecast.

Download or read book Analysing Intraday Implied Volatility for Pricing Currency Options written by Thi Le and published by Springer Nature. This book was released on 2021-04-13 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on the impact of high-frequency data in forecasting market volatility and options price. New technologies have created opportunities to obtain better, faster, and more efficient datasets to explore financial market phenomena at the most acceptable data levels. It provides reliable intraday data supporting financial investment decisions across different assets classes and instruments consisting of commodities, derivatives, equities, fixed income and foreign exchange. This book emphasises four key areas, (1) estimating intraday implied volatility using ultra-high frequency (5-minutes frequency) currency options to capture traders' trading behaviour, (2) computing realised volatility based on 5-minute frequency currency price to obtain speculators' speculation attitude, (3) examining the ability of implied volatility to subsume market information through forecasting realised volatility and (4) evaluating the predictive power of implied volatility for pricing currency options. This is a must-read for academics and professionals who want to improve their skills and outcomes in trading options.

Download or read book The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange Stock and Bond Markets written by Thomas Busch and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Testing the Informational Efficiency of OTC Options on Emerging Market Currencies written by Jorge A. Chan-Lau and published by . This book was released on 2003 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Forecasting Foreign Exchange Volatility written by and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "Research has consistently found that implied volatility is a conditionally biased predictor of realized volatility across asset markets. This paper evaluates explanations for this bias in the market for options on foreign exchange futures. No solution considered--including a model of priced volatility risk--explains the conditional bias found in implied volatility. Further, while implied volatility fails to subsume econometric forecasts in encompassing regressions, these forecasts do not significantly improve delta-hedging performance. Thus this paper deepens the implied volatility puzzle by rejecting popular explanations for forecast bias while demonstrating that statistical measures of bias and informational inefficiency should be treated with circumspection"--Federal Reserve Bank of St. Louis web site.

Download or read book Handbook of Exchange Rates written by Jessica James and published by John Wiley & Sons. This book was released on 2012-05-29 with total page 674 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Handbook of Exchange Rates “This book is remarkable. I expect it to become the anchor reference for people working in the foreign exchange field.” —Richard K. Lyons, Dean and Professor of Finance, Haas School of Business, University of California Berkeley “It is quite easily the most wide ranging treaty of expertise on the forex market I have ever come across. I will be keeping a copy close to my fingertips.” —Jim O’Neill, Chairman, Goldman Sachs Asset Management How should we evaluate the forecasting power of models? What are appropriate loss functions for major market participants? Is the exchange rate the only means of adjustment? Handbook of Exchange Rates answers these questions and many more, equipping readers with the relevant concepts and policies for working in today’s international economic climate. Featuring contributions written by leading specialists from the global financial arena, this handbook provides a collection of original ideas on foreign exchange (FX) rates in four succinct sections: • Overview introduces the history of the FX market and exchange rate regimes, discussing key instruments in the trading environment as well as macro and micro approaches to FX determination. • Exchange Rate Models and Methods focuses on forecasting exchange rates, featuring methodological contributions on the statistical methods for evaluating forecast performance, parity relationships, fair value models, and flow–based models. • FX Markets and Products outlines active currency management, currency hedging, hedge accounting; high frequency and algorithmic trading in FX; and FX strategy-based products. • FX Markets and Policy explores the current policies in place in global markets and presents a framework for analyzing financial crises. Throughout the book, topics are explored in-depth alongside their founding principles. Each chapter uses real-world examples from the financial industry and concludes with a summary that outlines key points and concepts. Handbook of Exchange Rates is an essential reference for fund managers and investors as well as practitioners and researchers working in finance, banking, business, and econometrics. The book also serves as a valuable supplement for courses on economics, business, and international finance at the upper-undergraduate and graduate levels.

Download or read book A Practical Guide to Forecasting Financial Market Volatility written by Ser-Huang Poon and published by John Wiley & Sons. This book was released on 2005-08-19 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market volatility forecasting is one of today's most important areas of expertise for professionals and academics in investment, option pricing, and financial market regulation. While many books address financial market modelling, no single book is devoted primarily to the exploration of volatility forecasting and the practical use of forecasting models. A Practical Guide to Forecasting Financial Market Volatility provides practical guidance on this vital topic through an in-depth examination of a range of popular forecasting models. Details are provided on proven techniques for building volatility models, with guide-lines for actually using them in forecasting applications.

Download or read book Currency Options And Exchange Rate Economics written by Zhaohui Chen and published by World Scientific. This book was released on 1998-04-21 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume is a collection of classical and recent empirical studies of currency options and their implications for issues of exchange rate economics, such as exchange rate risk premium, volatility, market expectations, and credibility of exchange rate regimes. It contains applications on how to extract useful information from option market data for financial forecasting policy purposes. The subjects are discussed in a self-contained, user-friendly format, with introductory chapters on currency option theory and currency option markets.The book can be used as supplementary reading for graduate finance and international economics courses, as training material for central bank and regulatory authorities, or as a reference book for financial analysts.

Download or read book The importance of being informed Forecasting market risk measures for the Russian RTS index future using online data and implied volatility over two decades written by Dean Fantazzini and published by Litres. This book was released on 2022-01-29 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on the forecasting of market risk measures for the Russian RTS index future, and examines whether augmenting a large class of volatility models with implied volatility and Google Trends data improves the quality of the estimated risk measures. We considered a time sample of daily data from 2006 till 2019, which includes several episodes of large-scale turbulence in the Russian future market. We found that the predictive power of several models did not increase if these two variables were added, but actually decreased.The worst results were obtained when these two variables were added jointly and during periods of high volatility, when parameters estimates became very unstable. Moreover, several models augmented with these variables did not reach numerical convergence. Our empirical evidence shows that, in the case of Russian future markets, TGARCH models with implied volatility and Student’s t errors are better choices if robust market risk measures are of concern.

Download or read book The Microstructure of Foreign Exchange Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2009-05-15 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: The foreign exchange market is the largest, fastest-growing financial market in the world. Yet conventional macroeconomic approaches do not explain why people trade foreign exchange. At the same time, they fail to explain the short-run determinants of the exchange rate. These nine innovative essays use a microstructure approach to analyze the workings of the foreign exchange market, with special emphasis on institutional aspects and the actual behavior of market participants. They examine the volume of transactions, heterogeneity of traders, the time of day and location of trading, the bid-ask spread, and the high level of exchange rate volatility that has puzzled many observers. They also consider the structure of the market, including such issues as nontransparency, asymmetric information, liquidity trading, the use of automated brokers, the relationship between spot and derivative markets, and the importance of systemic risk in the market. This timely volume will be essential reading for anyone interested in the economics of international finance.

Download or read book Empirical Evidence on Forecasting Exchange Rate Volatility written by Natacha Nehme and published by . This book was released on 2017 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research limitations -- A limitation that could have biased the results is that the return of EUR/USD, JPY/USD, GBP/USD and CHF/USD exchange rates was calculated based on the daily exchange rate. In fact, using intra-day volatility measurement could have led to better results in forecasting exchange rate volatility. Moreover, other models could have been used that exhibit different characteristics than GARCH (1, 1), EGARCH, GJR GARCH and EWMA models such as the Autoregressive Integrated Moving Average (ARIMA), the Integrated in Variance (IGARCH) and the Fractionally Integrated Generalized Autoregressive Conditional Heteroskedasticity (FIGARCH). In addition, other software could have replace EViews, such as Matlab. Practical implications -- The empirical results of this research have direct and fundamental implication on international investors and firms to better hedge currency risk. The findings will also assist policy makers in the international capital budgeting by understanding the pattern of exchange rates. Originality/value -- This study is an endeavor to fill the gap of previous literature by implementing the symmetric and asymmetric models to forecast the exchange rate volatility. In addition, it compares the performance of implied volatility to financial models, a topic that was ignored in previous researches. Moreover, no recent papers tackled the in-sample and out-of-sample EUR/USD, JPY/USD, GBP/USD and CHF/USD exchange rate volatility under a recent sample period and using this basket of models: GARCH (1, 1), EGARCH, GJR GARCH and EWMA. Therefore, the findings of this research will be used as a benchmark for investors, hedges, economists and financial institutions to accurately predict exchange rate volatility.

Download or read book Handbook of Economic Forecasting written by Graham Elliott and published by Elsevier. This book was released on 2013-08-23 with total page 667 pages. Available in PDF, EPUB and Kindle. Book excerpt: The highly prized ability to make financial plans with some certainty about the future comes from the core fields of economics. In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting. Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 (2006), concentrate on two major subjects. Volume 2A covers innovations in methodologies, specifically macroforecasting and forecasting financial variables. Volume 2B investigates commercial applications, with sections on forecasters' objectives and methodologies. Experts provide surveys of a large range of literature scattered across applied and theoretical statistics journals as well as econometrics and empirical economics journals. The Handbook of Economic Forecasting Volumes 2A and 2B provide a unique compilation of chapters giving a coherent overview of forecasting theory and applications in one place and with up-to-date accounts of all major conceptual issues. - Focuses on innovation in economic forecasting via industry applications - Presents coherent summaries of subjects in economic forecasting that stretch from methodologies to applications - Makes details about economic forecasting accessible to scholars in fields outside economics

Download or read book Forecasting Foreign Exchange Volatility written by Christopher J. Neely and published by . This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: