The Forecast Ability of Option-implied Densities from Emerging Markets Currencies

dc.creatorOrnelas, José Renato Haas
dc.date2016-03-10
dc.date.accessioned2022-11-03T21:19:25Z
dc.date.available2022-11-03T21:19:25Z
dc.identifierhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/45406
dc.identifier.urihttps://repositorioslatinoamericanos.uchile.cl/handle/2250/5048052
dc.descriptionThis paper empirically evaluates Risk-Neutral Densities (RND) and Real-World Densities (RWD) as predictors of emerging markets currencies. The dataset consists of volatility surfaces from 11 emerging market currencies, with approximately six years of daily data, using options with one-month expiration. Therefore, there is a strong overlapping in data, which is tackled with specific econometric techniques. Results of the out-of-sample assessment show that both RND and RWD underweight the tails of the actual distribution. This is probably due to the lack of options with extreme strikes. Although the RWDs perform better than RND in terms of Kolmogorov distance, they still have problems in fitting the tails of actual data. Thus, the risk-aversion adjustment may improve the forecast ability, but it does not solve the tails misfitting.en-US
dc.formatapplication/pdf
dc.languageeng
dc.publisherSociedade Brasileira de Econometriaen-US
dc.relationhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/45406/50482
dc.rightsCopyright (c) 2015 Brazilian Review of Econometricspt-BR
dc.sourceBrazilian Review of Econometrics; Vol. 36 No. 1 (2016); 133-153en-US
dc.sourceBrazilian Review of Econometrics; v. 36 n. 1 (2016); 133-153pt-BR
dc.source1980-2447
dc.subjectRelative Risk Versionen-US
dc.subjectRisk-Neutral Densityen-US
dc.subjectExchange Ratesen-US
dc.subjectC53en-US
dc.subjectC13en-US
dc.subjectE47en-US
dc.subjectG17en-US
dc.subjectF31en-US
dc.titleThe Forecast Ability of Option-implied Densities from Emerging Markets Currenciesen-US
dc.typeinfo:eu-repo/semantics/article
dc.typeinfo:eu-repo/semantics/publishedVersion


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