1,510 research outputs found

    The signalling channel of Central Bank interventions:modelling the Yen/US dollar exchange rate

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    This paper presents a theoretical framework analysing the signalling channel of exchange rate interventions as an informational trigger. We develop an implicit target zone framework with learning in order to model the signalling channel. The theoretical premise of the model is that interventions convey signals that communicate information about the exchange rate objectives of the central bank. The model is used to analyse the impact of Japanese FX interventions during the period 1999--2011 on the yen/US dollar dynamics

    Value at Risk models with long memory features and their economic performance

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    We study alternative dynamics for Value at Risk (VaR) that incorporate a slow moving component and information on recent aggregate returns in established quantile (auto) regression models. These models are compared on their economic performance, and also on metrics of first-order importance such as violation ratios. By better economic performance, we mean that changes in the VaR forecasts should have a lower variance to reduce transaction costs and should lead to lower exceedance sizes without raising the average level of the VaR. We find that, in combination with a targeted estimation strategy, our proposed models lead to improved performance in both statistical and economic terms

    Information and ambiguity: herd and contrarian behaviour in financial markets

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    “The final publication is available at Springer via http://dx.doi.org/10.1007/s11238-012-9334-3”The paper studies the impact of informational ambiguity on behalf of informed traders on history-dependent price behaviour in a model of sequential trading in nancial markets. Following Chateauneuf, Eichberger and Grant (2006), we use neo-additive capacities to model ambiguity. Such ambiguity and attitudes to it can engender herd and contrarian behaviour, and also cause the market to break down. The latter, herd and contrarian behaviour, can be reduced by the existence of a bid-ask spread.Research in part funded by ESRC grant RES-000-22-0650

    Exchange Rate Risk and Convergence to the Euro

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    This paper proposes a new monetary policy framework for effectively navigating the path to adopting the euro. The proposed policy is based on relative inflation forecast targeting and incorporates an ancillary target of declining exchange rate risk, which is suggested as a key criterion for evaluating the currency stability. A model linking exchange rate volatility to differentials over the euro zone in both inflation (target variable) and interest rate (instrument variable) is proposed. The model is empirically tested for the Czech Republic, Poland and Hungary, the selected new Member States of the EU that use direct inflation targeting to guide their monetary policies. The empirical methodology is based on the TARCH(p,q,r)-M model

    A new approach to bad news effects on volatilit y: the multiple-sign-volume sensitive regime EGARCH model (MSV-EGARCH)

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    In this paper, using daily data for six major international stock market indexes and a modified EGARCH specification, the links between stock market returns, volatility and trading volume are investigated in a new nonlinear conditional variance framework with multiple regimes and volume eff ects. Volatility forecast comparisons, using the Harvey-Newbold test for multiple forecasts encompassing, seem to demonstrate that the MSV- EGARCH complex threshold structure is able to correctly fit GARCH- type dynamics of the series under study and dominates competing standard asymmetric models in several of the considered stock indexes.info:eu-repo/semantics/publishedVersio
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