Forecasting the realized variance of the log-return of Korean won US dollar exchange rate addressing jumps both in stock-trading time and in overnight

Sooin Yun; Dong Wan Shin

doi:10.1016/j.jkss.2014.11.001

Forecasting the realized variance of the log-return of Korean won US dollar exchange rate addressing jumps both in stock-trading time and in overnight

Sooin Yun, Dong Wan Shin

Department of Statistics

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

For the Korean won US dollar exchange rate log-return, the continuous jump decomposition is applied both to the realized variance (RV) for business time of Korean stock trading and to the RV for non-business time, i.e. overnight, of no Korean stock trading. Different dynamics of the business-time jump and non-business-time jump are analyzed. The decomposition proves to produce substantially better out-of-sample forecasts for the exchange rate RV than the existing continuous jump decomposition applied to the whole day RV. The different jump dynamic is analyzed in terms of volatility spillovers from the RV of the KOSPI to the RV of the exchange rate for stock trading time and to that for overnight.

Original language	English
Pages (from-to)	390-402
Number of pages	13
Journal	Journal of the Korean Statistical Society
Volume	44
Issue number	3
DOIs	https://doi.org/10.1016/j.jkss.2014.11.001
State	Published - 1 Sep 2015

Bibliographical note

Funding Information:
The authors are very grateful for the valuable comments of three referees which improve the paper considerably. This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government, SRC Program ( 2011-0030811 ).

Publisher Copyright:
© 2014 The Korean Statistical Society.

Keywords

Continuous jump decomposition
High frequency data
Jump
Long-memory
Overnight realized variance
Volatility forecasting
Volatility spillover

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10.1016/j.jkss.2014.11.001

Cite this

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title = "Forecasting the realized variance of the log-return of Korean won US dollar exchange rate addressing jumps both in stock-trading time and in overnight",

abstract = "For the Korean won US dollar exchange rate log-return, the continuous jump decomposition is applied both to the realized variance (RV) for business time of Korean stock trading and to the RV for non-business time, i.e. overnight, of no Korean stock trading. Different dynamics of the business-time jump and non-business-time jump are analyzed. The decomposition proves to produce substantially better out-of-sample forecasts for the exchange rate RV than the existing continuous jump decomposition applied to the whole day RV. The different jump dynamic is analyzed in terms of volatility spillovers from the RV of the KOSPI to the RV of the exchange rate for stock trading time and to that for overnight.",

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author = "Sooin Yun and Shin, {Dong Wan}",

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N2 - For the Korean won US dollar exchange rate log-return, the continuous jump decomposition is applied both to the realized variance (RV) for business time of Korean stock trading and to the RV for non-business time, i.e. overnight, of no Korean stock trading. Different dynamics of the business-time jump and non-business-time jump are analyzed. The decomposition proves to produce substantially better out-of-sample forecasts for the exchange rate RV than the existing continuous jump decomposition applied to the whole day RV. The different jump dynamic is analyzed in terms of volatility spillovers from the RV of the KOSPI to the RV of the exchange rate for stock trading time and to that for overnight.

AB - For the Korean won US dollar exchange rate log-return, the continuous jump decomposition is applied both to the realized variance (RV) for business time of Korean stock trading and to the RV for non-business time, i.e. overnight, of no Korean stock trading. Different dynamics of the business-time jump and non-business-time jump are analyzed. The decomposition proves to produce substantially better out-of-sample forecasts for the exchange rate RV than the existing continuous jump decomposition applied to the whole day RV. The different jump dynamic is analyzed in terms of volatility spillovers from the RV of the KOSPI to the RV of the exchange rate for stock trading time and to that for overnight.

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Forecasting the realized variance of the log-return of Korean won US dollar exchange rate addressing jumps both in stock-trading time and in overnight

Abstract

Bibliographical note

Keywords

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