Portal de Periódicos da CAPES

ALTERNATIVE MODELS TO EXTRACT ASSET VOLATILITY: A COMPARATIVE STUDY

1999; Volume: 19; Issue: 1 Linguagem: Inglês

10.12660/bre.v19n11999.2793

2526-3722

Pedro L. Valls Pereira, Luiz Koodi Hotta, Luiz Alvares R. de Souza, Nuno Miguel C. G. de Almeida,

Monetary Policy and Economic Impact

This paper presents an empirical comparison of the estimation of the volatility of three Brazilian financial series: a Brazilian Brady bond (the Cbond), a stock (Telebrás PN) and the Brazilian Real/US Dollar exchange rate, using different modelling methods. The models used are: XARCH family, Stochastic Volatility (SV) and the switching in the variance model (SWARCH). The comparison is done using three criteria: loss functions, which compare the square of the estimated volatility with the instantaneous volatility, a procedure proposed by Herencia et alii (1998) which used prediction confidence intervals and one-stepahead prediction, and a prediction exercise for the last 100 observations. In general the SV model presented the best performance although it is dominated by other models in some criteria.