We investigate the pricing of volatility risks in currency markets. First, we show that pricing ability of volatility risk is concentrated in some of its components. Diffusive volatility dominates jump volatility in pricing carry trade returns, while jump volatility is important in jointly...

We investigate the real effects of foreign exchange (FX) uncertainty on an important economic growth engine-technological innovation. In a sample consisting of 55 countries, we measure FX uncertainty using the unexpected FX volatility and then show that heightened FX uncertainty is associated...

We develop a Markov-Switching Autoregressive Conditional Intensity (MS-ACI) model with time-varying transitional parameters, and show that it can be reliably estimated via the Stochastic Approximation Expectation-Maximization algorithm. Applying our model to high-frequency transaction data, we...

In this paper we examine the relative importance of trading volume, bid-ask spread, order flow, order imbalance, total quote depth, quote depth difference and trading intensity for high-frequency volatility estimation. By using a best subset regression approach, we fi nd that contemporaneous...