IDEAS home Printed from https://ideas.repec.org/p/boi/wpaper/2010.01.html
   My bibliography  Save this paper

An Upgrade of the Models Used To Forecast the Distribution of the Exchange Rate

Author

Listed:
  • Daniel Nathan

    () (Bank of Israel)

Abstract

The Bank of Israel uses two models, one parametric and one non-parametric, to construct a distribution function for the future shekel/dollar exchange rate. The construction of the distribution is based on theoretical developments as described in the literature, adjusted to the market for forex options traded on the Israeli stock exchange. To calibrate the models, the Bank of Israel uses option prices sampled from the order book during the day. The purpose of this study is to propose a method for filtering out abnormal observations that arise due to the relatively low level of trade in a considerable share of options at the various strike prices using a filter based on the arbitrage rules found in the literature. The method improved the stability of both models in comparison to the filtering methods currently used at the Bank of Israel.

Suggested Citation

  • Daniel Nathan, 2011. "An Upgrade of the Models Used To Forecast the Distribution of the Exchange Rate," Bank of Israel Working Papers 2010.01, Bank of Israel.
  • Handle: RePEc:boi:wpaper:2010.01
    as

    Download full text from publisher

    File URL: ftp://repec-boi.northeurope.cloudapp.azure.com/RePEc/boi/wpaper/WP_2010.01.pdf
    File Function: First version, 2011
    Download Restriction: no

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boi:wpaper:2010.01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dafna Koby). General contact details of provider: http://edirc.repec.org/data/boigvil.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.