Nominal exchange-rate prediction: evidence from a nonlinear approach
β Scribed by Jyh-Lin Wu; Show-Lin Chen
- Book ID
- 117427676
- Publisher
- Elsevier Science
- Year
- 2001
- Tongue
- English
- Weight
- 70 KB
- Volume
- 20
- Category
- Article
- ISSN
- 0261-5606
No coin nor oath required. For personal study only.
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## Abstract This paper uses a measure of the relative price of outβofβtheβmoney (OTM) European put and call currency options to forecast daily movements in the dollar/euro exchange rate over the period of January 2002βJune 2004. As these OTM options are pure bets on future movements of the exchange
In the economics literature on exchange rate determination no theory has yet been found that performs well in out-of-sample prediction experiments. Until today the simple random walk model has never been significantly outperformed. We have identified a set of fundamental long-run exchange rate model