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Forecasting Exchange Rate Density using Parametric Models: The Case of Brazil

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Author Info

  • Marcos M. Abe
  • Eui J. Chang
  • Benjamin M. Tabak

Abstract

This paper employs a recently developed parametric technique to obtain density forecasts for the Brazilian exchange rate, using the exchange rate options market. Empirical results suggest that the option market contains useful information about future exchange rate density. These results suggests that density forecasts using options markets may add value for portfolio and risk management, and may be useful for financial regulators to assess financial stability.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps138.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 138.

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Date of creation: May 2007
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Handle: RePEc:bcb:wpaper:138

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Web page: http://www.bcb.gov.br/?english

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Cited by:
  1. Ornelas, Jose Renato Haas & Barbachan, José Fajardo & Farias, Aquiles Rocha de, 2012. "Estimating Relative Risk Aversion, Risk-Neutral and Real-World Densities using Brazilian Real Currency Options," EBAPE Working Papers 1, School of Public and Business Administration, Getulio Vargas Foundation (Brazil).

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