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:	Carlos Heitor Campani, Assis Gustavo da Silva Duraes
Formato:	article
Lenguaje:	EN PT
Publicado:	Universidade de São Paulo 2018
Materias:	Volatility forecasts Extended GARCH models Implied volatility indices Brazilian foreign exchange market Economics as a science HB71-74
Acceso en línea:	https://doaj.org/article/4ae89426d14948e69b571a2b3de49a8e
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spelling	oai:doaj.org-article:4ae89426d14948e69b571a2b3de49a8e2021-11-24T14:26:34ZForecasting USD-BRL currency rate volatility using realized and implied volatilities data10.1590/0101-41614845cca0101-41611980-5357https://doaj.org/article/4ae89426d14948e69b571a2b3de49a8e2018-12-01T00:00:00Zhttps://www.revistas.usp.br/ee/article/view/131900https://doaj.org/toc/0101-4161https://doaj.org/toc/1980-5357 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. Carlos Heitor CampaniAssis Gustavo da Silva DuraesUniversidade de São PauloarticleVolatility forecastsExtended GARCH modelsImplied volatility indicesBrazilian foreign exchange marketEconomics as a scienceHB71-74ENPTEstudos Econômicos, Vol 48, Iss 4 (2018)
institution	DOAJ
collection	DOAJ
language	EN PT
topic	Volatility forecasts Extended GARCH models Implied volatility indices Brazilian foreign exchange market Economics as a science HB71-74
spellingShingle	Volatility forecasts Extended GARCH models Implied volatility indices Brazilian foreign exchange market Economics as a science HB71-74 Carlos Heitor Campani Assis Gustavo da Silva Duraes Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
description	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.
format	article
author	Carlos Heitor Campani Assis Gustavo da Silva Duraes
author_facet	Carlos Heitor Campani Assis Gustavo da Silva Duraes
author_sort	Carlos Heitor Campani
title	Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
title_short	Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
title_full	Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
title_fullStr	Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
title_full_unstemmed	Forecasting USD-BRL currency rate volatility using realized and implied volatilities data
title_sort	forecasting usd-brl currency rate volatility using realized and implied volatilities data
publisher	Universidade de São Paulo
publishDate	2018
url	https://doaj.org/article/4ae89426d14948e69b571a2b3de49a8e
work_keys_str_mv	AT carlosheitorcampani forecastingusdbrlcurrencyratevolatilityusingrealizedandimpliedvolatilitiesdata AT assisgustavodasilvaduraes forecastingusdbrlcurrencyratevolatilityusingrealizedandimpliedvolatilitiesdata
_version_	1718414987214454784

Forecasting USD-BRL currency rate volatility using realized and implied volatilities data

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