Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40248
Authors: 
Rezania, Omid
Rachev, Svetlozar T.
Sun, Edward
Fabozzi, Frank J.
Year of Publication: 
2010
Series/Report no.: 
Working Paper Series in Economics 3
Abstract: 
Using four years of second-by-second executed trade data, we study the intraday effects of a representative group of scheduled economic releases on three exchange rates: EUR/$, JPY/$ and GBP/$. Using wavelets to analyze volatility behavior, we empirically show that intraday volatility clusters increase as we approach the time of the releases, and decay exponentially after the releases. Moreover, we compare our results with the results of a poll that we conducted of economists and traders. Finally, we propose a wavelet volatility estimator which is not only more efficient than a range estimator that is commonly used in empirical studies, but also captures the market dynamics as accurately as a range estimator. Our approach has practical value in high-frequency algorithmic trading, as well as electronic market making.
Subjects: 
Foreign exchange
volatility estimation
economic release
wavelet
high frequency
JEL: 
F31
G14
G15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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