Exchange rate dynamics in anticipation of time-contingent regime switching: modelling the effects of a possible delay
Article Abstract:
The procedure of fixing a currently floating exchange rate at a given (and publicly announced) future date has a broad range of applications. Based on a (continuous-time) monetary exchange rate model with flexible prices, this paper analyzes exchange rate dynamics during the transition from floating to fixed rates in a situation in which market participants are uncertain about adherence to the fixing date and in which they take account of a possible delay in the regime switch. The closed-form solutions derived here allow us to quantify announcement effects as well as effects on the exchange rate variance caused by news that significantly changes the market's assessment of uncertainty. [C] 2001 Elsevier Science Ltd. All rights reserved. JEL classification: F31; F33 Keywords: Exchange rate regime switches; Stochastic processes; Mixtures of distributions; Uncertainty
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 2001
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Forecasting daily exchange rate volatility using intraday returns
Article Abstract:
This study investigates whether intraday returns contain important information for forecasting daily volatility. Whereas in the existing literature volatility models for daily returns are improved by including intraday information such as the daily high and low, volume, the number of trades, and intraday returns, here the volatility of intraday returns is explicitly modelled. Daily volatility forecasts are constructed from multiple volatility forecasts for intraday intervals. It is shown for the DEM/USD and the YEN/USD exchange rates that this results in superior forecasts for daily volatility. [C] 2001 Elsevier Science Ltd. All rights reserved. JEL classification: G15 Keywords: Foreign exchange rates; Forecasting volatility; GARCH; Value-at-risk
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 2001
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Interaction between stock markets: an analysis of the common trading hours at the London and New York stock exchange
Article Abstract:
Index-futures contract prices have been used to analyze the relationship between stock volatility and spill-over returns of New York and London stock markets. By using high-frequency data for stock index futures, it was established that both market's future returns influence each other, only that the impact of the United States on United Kingdom is greater. Moreover, both countries' intraday volatility patterns are characterized by a U-shaped graph, which implies that high volatility occurs during late afternoon and morning and subsides the rest of the day.
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 1997
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