Scaling properties of foreign exchange volatility
| dc.citation.epage | 266 | en_US |
| dc.citation.issueNumber | 1-2 | en_US |
| dc.citation.spage | 249 | en_US |
| dc.citation.volumeNumber | 289 | en_US |
| dc.contributor.author | Gençay, R. | en_US |
| dc.contributor.author | Selçuk, F. | en_US |
| dc.contributor.author | Whitcher, B. | en_US |
| dc.date.accessioned | 2016-02-08T10:36:11Z | |
| dc.date.available | 2016-02-08T10:36:11Z | |
| dc.date.issued | 2001 | en_US |
| dc.department | Department of Economics | en_US |
| dc.description.abstract | In this paper, we investigate the scaling properties of foreign exchange volatility. Our methodology is based on a wavelet multi-scaling approach which decomposes the variance of a time series and the covariance between two time series on a scale by scale basis through the application of a discrete wavelet transformation. It is shown that foreign exchange rate volatilities follow different scaling laws at different horizons. Particularly, there is a smaller degree of persistence in intra-day volatility as compared to volatility at one day and higher scales. Therefore, a common practice in the risk management industry to convert risk measures calculated at shorter horizons into longer horizons through a global scaling parameter may not be appropriate. This paper also demonstrates that correlation between the foreign exchange volatilities is the lowest at the intra-day scales but exhibits a gradual increase up to a daily scale. The correlation coefficient stabilizes at scales one day and higher. Therefore, the benefit of currency diversification is the greatest at the intra-day scales and diminishes gradually at higher scales (lower frequencies). The wavelet cross-correlation analysis also indicates that the association between two volatilities is stronger at lower frequencies. | en_US |
| dc.description.provenance | Made available in DSpace on 2016-02-08T10:36:11Z (GMT). No. of bitstreams: 1 bilkent-research-paper.pdf: 70227 bytes, checksum: 26e812c6f5156f83f0e77b261a471b5a (MD5) Previous issue date: 2001 | en |
| dc.identifier.doi | 10.1016/S0378-4371(00)00456-8 | en_US |
| dc.identifier.eissn | 1873-2119 | |
| dc.identifier.issn | 0378-4371 | |
| dc.identifier.uri | http://hdl.handle.net/11693/24916 | |
| dc.language.iso | English | en_US |
| dc.publisher | Elsevier BV | en_US |
| dc.relation.isversionof | http://dx.doi.org/10.1016/S0378-4371(00)00456-8 | en_US |
| dc.source.title | Physica A : Statistical Mechanics and its Applications | en_US |
| dc.subject | Correlation methods | en_US |
| dc.subject | Multi-scaling | en_US |
| dc.subject | International trade | en_US |
| dc.subject | Wavelets | en_US |
| dc.subject | Scaling | en_US |
| dc.subject | Foreign exchange volatility | en_US |
| dc.subject | Risk management | en_US |
| dc.title | Scaling properties of foreign exchange volatility | en_US |
| dc.type | Article | en_US |
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