Risk Assessment of the Brazilian FX Rate
In this paper, we construct several multi-step-ahead density forecasts for the foreign exchange (FX) rate based on statistical, financial data and economic-driven approaches. The objective is to go beyond the standard conditional mean investigation of the FX rate and (for instance) allow for asymmetric responses of covariates (e.g. financial data or economic fundamentals) in respect to exchange rate movements. We also provide a toolkit to evaluate out-of-sample density forecasts and select models for risk analysis purposes. An empirical exercise for the Brazilian FX rate is provided. Overall, the results suggest that no single model properly accounts for the entire density in all considered forecast horizons. Nonetheless, the GARCH model as well as the option-implied approach seem to be more suitable for short-run purposes (until three months), whereas the survey-based and some economic-driven models appear to be more adequate for longer horizons (such as one year)
Year of publication: |
2014-01
|
---|---|
Authors: | Gaglianone, Wagner Piazza ; Marins, Jaqueline Terra Moura |
Institutions: | Central Bank of Brazil, Research Department |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Saliby, Eduardo, (2007)
-
Aplicação da Amostragem por Importância à Simulação de Opções Asiáticas Fora do Dinheiro
Marins, Jaqueline Terra Moura, (2007)
-
Credit Default and Business Cycles: an empirical investigation of Brazilian retail loans
Correa, Arnildo da Silva, (2011)
- More ...