Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
This article assesses the impact of exogenous variables in GARCH models, when applied to volatility forecasts for the Brazilian USD-BRL currency market. As exogenous variables, we used the realized variance, based on high frequency data, and the FXVol index, based on market implied volatility data....
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| Autores principales: | , |
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| Formato: | article |
| Lenguaje: | EN PT |
| Publicado: |
Universidade de São Paulo
2018
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| Acceso en línea: | https://doaj.org/article/4ae89426d14948e69b571a2b3de49a8e |
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| Sumario: | This article assesses the impact of exogenous variables in GARCH models, when applied to volatility forecasts for the Brazilian USD-BRL currency market. As exogenous variables, we used the realized variance, based on high frequency data, and the FXVol index, based on market implied volatility data. This is the first study to use the FXVol index and to investigate its effects on Brazilian foreign exchange volatility. The results indicate statistical significance of the superiority of the extended models when predicting volatility. We conclude that high frequency data and market implied volatility contain relevant information with respect to USD-BRL currency volatility. These findings are relevant for hedgers, speculators and practitioners in general.
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