In this study, we forecast the term structure of EURIBOR swap rates by means of rolling vector autoregressive (VAR) models. In advance, a principal component analysis (PCA) is adopted to reduce the dimensionality of the term structure. To statistically assess the forecasting performance for...

In this paper we adopt a principal components analysis (PCA) to reduce the dimensionality of the term structure and employ autoregressive (AR) models to forecast principal components which, in turn, are used to forecast swap rates. Arguing in favour of structural variation, we propose...

In this study, we forecast the term structure of EURIBOR swap rates by means of rolling vector autoregressive (VAR) models. In advance, a principal component analysis (PCA) is adopted to reduce the dimensionality of the term structure. To statistically assess the forecasting performance for...

In this study we forecast the term structure of FIBOR/EURIBOR swap rates by means of recursive vector autoregressive (VAR) models. In advance, a principal components analysis (PCA) is adopted to reduce the dimensionality of the term structure. To evaluate ex–ante forecasting performance for...

The paper proposes a data driven adaptive model selection strategy. The selection crite- rion measures economic ex–ante forecasting content by means of trading implied cash flows. Empirical evidence suggests that the proposed strategy is neither exposed to selection bias nor to the risk of...

Common approaches to test for the economic value of directional forecasts are based on the classical Chi-square test for independence, Fisher’s exact test or the Pesaran and Timmerman (1992) test for market timing. These tests are asymptotically valid for serially independent observations....

It is commonly accepted that information is helpful if it can be exploited to improve a decision mak- ing process. In economics, decisions are often based on forecasts of up{ or downward movements of the variable of interest. We point out that directional forecasts can provide a useful framework...

Common approaches to testing the economic value of directional forecasts are based on the classical χ2-test for independence, Fisher’s exact test or the Pesaran and Timmermann test for market timing. These tests are asymptotically valid for serially independent observations, but in the...

A huge body of empirical and theoretical literature has emerged on the relationship between foreign exchange (FX) uncertainty and international trade. Empirical findings about the impact of FX uncertainty on trade figures are at best weak and often ambiguous with respect to its direction. Almost...