Since financial derivatives are key instruments for risk taking as well as risk reduction, it is only straightforward to examine their role in currency crises. This paper addresses this issue by investigating the impact of currency futures trading on the underlying exchange rates. After a discussion of trading mechanisms and trader types, the linkage between futures trading activity and spot ma...

7 Article history: 8 Received 15 November 2012 9 Received in revised form 25 January 2013 10 Accepted 29 January 2013 11 Available online xxxx 1234 15 JEL classification: 16 C15 17 C32 18 G13 19 G15 20

Abstract This article discusses the evolution of monetary policy (MP) in Peru 1996Q1–2019Q4 using a mixture innovation time-varying parameter vector autoregressive (VAR) model with stochastic volatility (TVP-VAR-SV) as proposed by Koop, Leon-Gonzales and Strachan. The main empirical results are: (i) VAR coefficients volatilities change more gradually than contemporaneous over time; (ii) MP shoc...

The purpose of this paper is to demonstrate that the success of the Litterman prior in VAR forecasting is not due to the realism of the prior, but rather because the prior conveniently reduces forecast error variance in common cases of misspecification. Specifically, it is shown that the imposition of a random walk prior reduces forecast error variance in misspecifications involving (1) time-va...

in this study, we assess the impact of oil price changes on the macroeconomic variables of some oil importers in oecd countries, including usa, italian, france and japan during the period 1960-2002. the results for different countries imply asymmetric impact of oil price changes on gdp growth rates; moreover, the results show that monetary shocks are an important and noticeable factor explainin...

This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. Evaluation of volatility models is then considered and a simple Value-at-Risk (VaR) diagnostic test is proposed for individual as well as ‘average’ mod...

Large aggregation interval asymptotics are used to investigate the relation between Granger causality in disaggregated vector autoregressions (VARs) and associated contemporaneous correlation among innovations of the aggregated system. Our approach allows us to better understand the informational content in non-diagonal error covariance matrices, which play an important role in structural VAR a...

This paper reexamines the effects of inflation uncertainty on real economic activity by utilizing a flexible, dynamic, multivariate framework that accommodates possible interaction between the conditional means and variances. The empirical model is based on the identified vector autoregressive regression of Bernanke and Gertler (1995), modified to accommodate multivariate generalized autoregres...

This paper examines jump dynamic patterns in three Chinese medical stocks. It also compares the Value-at-Risk (VaR) forecasting performance of a newly proposed realized volatility model allowing for jumps with that of two commonly used realized volatility models, which do not account for jumps. Using the Heterogeneous Autoregressive Realized Volatility model that allows for jumps (HAR-CJN), we ...

This paper proposes new iterative reduced-rank regression procedures for seasonal cointegration analysis. The suggested methods are motivated by the idea that modelling jointly the cointegration restrictions at the different frequencies may induce some efficiency gain in finite samples. Monte Carlo simulations indicate that the new tests and estimators perform well with respect to already exist...