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New and fast block bootstrap-based prediction intervals for GARCH(1,1) process with application to exchange rates. (English) Zbl 1387.62098
Summary: In this paper, we propose a new bootstrap algorithm to obtain prediction intervals for generalized autoregressive conditionally heteroscedastic (GARCH(1,1)) process which can be applied to construct prediction intervals for future returns and volatilities. The advantages of the proposed method are twofold: it (a) often exhibits improved performance and (b) is computationally more efficient compared to other available resampling methods. The superiority of this method over the other resampling method-based prediction intervals is explained with Spearman’s rank correlation coefficient. The finite sample properties of the proposed method are also illustrated by an extensive simulation study and a real-world example.

MSC:
62M10 Time series, auto-correlation, regression, etc. in statistics (GARCH)
62G09 Nonparametric statistical resampling methods
62M20 Inference from stochastic processes and prediction
62P05 Applications of statistics to actuarial sciences and financial mathematics
Software:
dtw
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