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Author Reus, L.; Carrasco, J.A.; Pincheira, P.
Title Do it with a smile: Forecasting volatility with currency options Type
Year 2020 Publication Finance Research Letters Abbreviated Journal Financ. Res. Lett.
Volume (down) 34 Issue Pages 10 pp
Keywords Volatility forecast; Volatility smile; Latin American markets; Currency options
Abstract We show that traditional measures of curvature and symmetry of the “smiles” improve volatility predictions in forex markets. We consider post crisis data at a daily basis for seven currencies vis a vis the American dollar: The British pound, the Euro, the Australian dollar, the Japanese yen, the Brazilian real and the Mexican and Chilean peso. While our results are robust to the option currency and maturity, they are particularly strong for latin-American currencies and options with longer maturity. We find that the simultaneous inclusion of skewness and kurtosis to a forecasting model significantly improves its predictive accuracy.
Address [Reus, Lorenzo; Carrasco, Jose A.] Univ Adolfo Ibanez, Fac Ingn & Ciencias, Santiago 2640, Chile, Email: lorenzo.reus@uai.cl;
Corporate Author Thesis
Publisher Academic Press Inc Elsevier Science Place of Publication Editor
Language English Summary Language Original Title
Series Editor Series Title Abbreviated Series Title
Series Volume Series Issue Edition
ISSN 1544-6123 ISBN Medium
Area Expedition Conference
Notes WOS:000551346400022 Approved
Call Number UAI @ eduardo.moreno @ Serial 1209
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Author Castaneda, P.; Reus, L.
Title Suboptimal investment behavior and welfare costs: A simulation based approach Type
Year 2019 Publication Finance Research Letters Abbreviated Journal Financ. Res. Lett.
Volume (down) 30 Issue Pages 170-180
Keywords Asset allocation; Martingale method; Portfolio selection; Suboptimal investment; Monte Carlo simulation; Welfare loss
Abstract We propose a representation of suboptimal investment behavior based on the stochastic discount factor (SDF) paradigm. Suboptimal investment behavior is rationalized as being the investor's optimal decision under a wrong SDF, while wealth trajectories and budget constraints are based on the true SDF. We develop a novel Monte Carlo simulation approach to compute the welfare costs for this suboptimal behavior. We study the suboptimal portfolio choice under CRRA preferences using two financial market models. The Monte Carlo simulation delivers comparable welfare losses to those computed in the original studies, which are based on partial differential equations (PDE) and – finite-difference schemes.
Address [Castaneda, Pablo] Univ Adolfo lbanez, Business Sch, Diagonal Las Torres 2640, Santiago, Chile, Email: pablo.castaneda@uai.cl;
Corporate Author Thesis
Publisher Academic Press Inc Elsevier Science Place of Publication Editor
Language English Summary Language Original Title
Series Editor Series Title Abbreviated Series Title
Series Volume Series Issue Edition
ISSN 1544-6123 ISBN Medium
Area Expedition Conference
Notes WOS:000487349000024 Approved
Call Number UAI @ eduardo.moreno @ Serial 1169
Permanent link to this record