Exchange rates typically exhibit time-varying patterns in both means and variances. The histograms of such series indicate heavy tails. In this paper we construct models which enable a decision-maker to analyze the implications of such time series patterns for currency risk management. Our...

One of the stylized facts in financial and international economics is that of increasing predictability of variables such as exchange rates and stock returns at longer horizons. This fact is based upon applications of long horizon regressions, from which the typical findings are that the point...

In this paper we consider forecasting daily exchange rate returns using neutral network models (NNs). Based on simulations, we argue (i) that neglected GARCH does not lead to spuriously successful NNs and (ii) that if there is nonlinearity in the conditional mean, NNs will exploit this for...