Related papers: Model instability in predictive exchange rate regr…
We propose a novel framework for modeling time-varying persistence in economic time series, allowing for smoothly evolving heterogeneity in shock dynamics. We leverage localized regression techniques to flexibly identify changes in…
Many studies have shown that there are good reasons to claim very low predictability of currency nevertheless, the deviations from true randomness exist which have potential predictive and prognostic power [J.James, Quantitative finance 3…
$\alpha$-stable distributions are utilised as models for heavy-tailed noise in many areas of statistics, finance and signal processing engineering. However, in general, neither univariate nor multivariate $\alpha$-stable models admit closed…
We consider the filtering of continuous-time finite-state hidden Markov models, where the rate and observation matrices depend on unknown time-dependent parameters, for which no prior or stochastic model is available. We quantify and…
This paper aims at solving FX market volatility modeling problem and finding the most becoming approach to this task. Validity of two competing approaches, classical econometric generalized conditional heteroscedasticity and mathematical…
We introduce an autoregressive-type model with self-modulation effects for a foreign exchange rate by separating the foreign exchange rate into a moving average rate and an uncorrelated noise. From this model we indicate that traders are…
Discrimination between non-stationarity and long-range dependency is a difficult and long-standing issue in modelling financial time series. This paper uses an adaptive spectral technique which jointly models the non-stationarity and…
This chapter covers methodological issues related to estimation, testing and computation for models involving structural changes. Our aim is to review developments as they relate to econometric applications based on linear models.…
Mathematical models of the real world are simplified representations of complex systems. A caveat to using mathematical models is that predicted causal effects and conditional independences may not be robust under model extensions, limiting…
This paper develops a Bayesian procedure for estimation and forecasting of the volatility of multivariate time series. The foundation of this work is the matrix-variate dynamic linear model, for the volatility of which we adopt a…
In inference problems involving a multi-dimensional parameter $\theta$, it is often natural to consider decision rules that have a risk which is invariant under some group $G$ of permutations of $\theta$. We show that this implies that the…
Throughout the past year, Turkey's central bank policy to decrease the nominal interest rate has caused episodes of severe fluctuations in Turkish lira exchange rates. According to these conditions, the daily return of the USD/TRY have…
This paper investigates the time-varying impacts of international macroeconomic uncertainty shocks. We use a global vector autoregressive specification with drifting coefficients and factor stochastic volatility in the errors to model six…
We discuss Bayesian model uncertainty analysis and forecasting in sequential dynamic modeling of multivariate time series. The perspective is that of a decision-maker with a specific forecasting objective that guides thinking about relevant…
This article discusses a partially adapted particle filter for estimating the likelihood of a nonlinear structural econometric state space models whose state transition density cannot be expressed in closed form. The filter generates the…
Exchangeability -- in which the distribution of an infinite sequence is invariant to reorderings of its elements -- implies the existence of a simple conditional independence structure that may be leveraged in the design of statistical…
We explore the concept of a consistent exchangeable survival process - a joint distribution of survival times in which the risk set evolves as a continuous-time Markov process with homogeneous transition rates. We show a correspondence with…
Pricing extremely long-dated liabilities market consistently deals with the decline in liquidity of financial instruments on long maturities. The aim is to quantify the uncertainty of rates up to maturities of a century. We assume that the…
Forecasting central bank policy decisions remains a persistent challenge for investors, financial institutions, and policymakers due to the wide-reaching impact of monetary actions. In particular, anticipating shifts in the U.S. federal…
Any discussion on exchange rate movements and forecasting should include explanatory variables from both the current account and the capital account of the balance of payments. In this paper, we include such factors to forecast the value of…