Yfanti_Karanasos2021_Article_TheLongMemoryHEAVYProcessModel.pdf (954.89 kB)
The long memory HEAVY process: modeling and forecasting financial volatility
journal contribution
posted on 2020-02-20, 13:45 authored by M Karanasos, Stavroula Yfanti, A Christopoulos© 2020, The Author(s). This paper studies the bivariate HEAVY system of volatility regression equations and its various extensions that are directly applicable to the day-to-day business treasury operations of trading in foreign exchange and commodities, investing in bond and stock markets, hedging out market risk, and capital budgeting. We enrich the HEAVY framework with powers, asymmetries, and long memory that improve its forecasting accuracy significantly. Other findings are as follows. First, hyperbolic memory fits the realized measure better, whereas fractional integration is more suitable for the powered returns. Second, the structural breaks applied to the bivariate system capture the time-varying behavior of the parameters, in particular during and after the global financial crisis of 2007/2008.
History
School
- Business and Economics
Department
- Business
Published in
Annals of Operations ResearchVolume
306Pages
111-130Publisher
Springer (part of Springer Nature)Version
- VoR (Version of Record)
Rights holder
© the AuthorsPublisher statement
This is an Open Access Article. It is published by Springer under the Creative Commons Attribution 4.0 Unported Licence (CC BY). Full details of this licence are available at: http://creativecommons.org/licenses/by/4.0/Acceptance date
2019-12-02Publication date
2020-01-04Copyright date
2021ISSN
0254-5330eISSN
1572-9338Publisher version
Language
- en
Depositor
Dr Stavroula Yfanti Deposit date: 19 February 2020Usage metrics
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No categories selectedKeywords
AsymmetriesFinancial crisisForecastingHEAVY modelHigh-frequency dataLong memoryPower transformationsRealized varianceRisk managementStructural breaksScience & TechnologyTechnologyOperations Research & Management ScienceCONDITIONAL CORRELATIONASYMPTOTIC THEORYREALIZED KERNELSGARCHHETEROSCEDASTICITYOperations ResearchMathematical SciencesInformation and Computing SciencesCommerce, Management, Tourism and Services
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