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| Author: | Pong, S. (et al.) |
| Title: | Forecasting currency volatility: A comparison of implied volatilities and AR(FI)MA models |
| Journal: | Journal of Banking and Finance
2004 : OCT, VOL. 28:10, p. 2541-2563 |
| Index terms: | Exchange rates Currency Volatility Models |
| Language: | eng |
| Abstract: | In the paper, forecasts of the realized volatility of the pound, mark and yen exchange rates against the dollar are compared, calculated from intraday rates, over horizons ranging from one day to three months. Forecasts are obtained from a short memory ARMA model, a long memory ARFIMA model, a GARCH model and option implied volatilities. Intraday rates are found to provide the most accurate forecasts for the one-day and one-week forecast horizons while implied volatilities are at least as accurate as the historical forecasts for the one-month and three-month horizons. Significant incremental information is found in historical forecasts, beyond the implied volatility information, for forecast horizons up to one week. |
SCIMA