The predictive capacity of GARCH-type models in measuring the volatility of crypto and world currencies

This paper provides a thorough overview and further clarification surrounding the volatility behavior of the major six cryptocurrencies (Bitcoin, Ripple, Litecoin, Monero, Dash and Dogecoin) with respect to world currencies (Euro, British Pound, Canadian Dollar, Australian Dollar, Swiss Franc and the Japanese Yen), the relative performance of diverse GARCH-type specifications namely the SGARCH, IGARCH (1,1), EGARCH (1,1), GJR-GARCH (1,1), APARCH (1,1), TGARCH (1,1) and CGARCH (1,1), and the forecasting performance of the Value at Risk measure. The sampled period extends from October 13th 2015 till November 18th 2019. The findings evidenced the superiority of the IGARCH model, in both the in-sample and the out-of-sample contexts, when it deals with forecasting the volatility of world currencies, namely the British Pound, Canadian Dollar, Australian Dollar, Swiss Franc and the Japanese Yen. The CGARCH alternative modeled the Euro almost perfectly during both periods. Advanced GARCH models better depicted asymmetries in cryptocurrencies’ volatility and revealed persistence and “intensifying” levels in their volatility. The IGARCH was the best performing model for Monero. As for the remaining cryptocurrencies, the GJR-GARCH model proved to be superior during the in-sample period while the CGARCH and TGARCH specifications were the optimal ones in the out-of-sample interval. The VaR forecasting performance is enhanced with the use of the asymmetric GARCH models. The VaR results provided a very accurate measure in determining the level of downside risk exposing the selected exchange currencies at all confidence levels. However, the outcomes were far from being uniform for the selected cryptocurrencies: convincing for Dash and Dogcoin, acceptable for Litecoin and Monero and unconvincing for Bitcoin and Ripple, where the (optimal) model was not rejected only at the 99% confidence level.

Does currency smirk predict foreign exchange return?

This study examines the predictive power of implied volatility smirk to forecast foreign exchange (FX) return. The volatility smirk contains critical information, especially when the market experiences negative news. The Australian dollar, Canadian dollar, Swiss franc, Euro, and British pound options traded in the opening, midday and closing periods of the trading day are selected to estimate the currency smirk. Research results reveal that the currency smirk outperforms in forecasting FX returns. In addition, the steeper slope in the middle of the trading day suggests that the predictive power of currency smirk in the midday period is higher compared to the opening and closing periods. However, currency smirks’ predictability lasts for a short period, as the FX market is highly adept at incorporating the vital information embedded in the currency smirk. These findings imply that the currency smirk is distinctive for forecasting very short-term FX fluctuations, and the day- or overnight FX traders can use its uniqueness to profit from quick price swings in the 24-hour global FX market.

Quick NAFTA deal is unlikely

Subject NAFTA update. Significance Negotiators from Canada, Mexico and the United States will reconvene this month to address major disagreements on critical NAFTA provisions. The meeting will give negotiators their first opportunity to take stock of their governments' respective positions in the aftermath of Mexico's elections, the recent imposition of key US import tariffs and the retaliatory measures taken by US trading partners. While the grounds for agreement exist, the chances of a rapid conclusion are remote. Impacts Trade uncertainty will hit prospects for industrial growth, earnings, cash flow and investment across North America. The Canadian dollar and the peso are likely to remain weak against the US dollar throughout 2018. The threat of new US auto tariffs may hasten agreement on NAFTA auto provisions, giving Trump an early negotiating victory.

Washington will target Canada’s dairy support system

Significance Trump has attacked Canada’s system of supply management and imposed a 20% tariff on Canadian softwood lumber in his first major trade action. This signals the opening moves in a renegotiation of NAFTA and highlights Canada’s vulnerability to US protectionism. Global overproduction of dairy products has led to accusations from US producers, as well as Australia and New Zealand, that Canada is not honouring its commitments under trade rules. Impacts US pressure on NAFTA may lend momentum to Ottawa’s trade talks with Beijing. Trump is likely to overstate the economic impact of international competition in a bid to consolidate rural support. Slowing Asian demand for dairy products amid overproduction could expose higher-cost producers to significant market headwinds. Canadian exporters will benefit from Trump-related downward pressure on the Canadian dollar.

The Canadian Dollar versus the Collection: How Canadian Academic Libraries are Coping

Through 2015 and into 2016, Canadian academic libraries’ collections budgets were severely strained due to the steady decline of the CAD/USD exchange rate. As most subscription fees for electronic resources (e-resources) are billed in US dollars, the falling value of the Canadian dollar significantly reduced libraries’ purchasing power. This study is based on a survey of the English-speaking member institutions of the Canadian Research Knowledge Network (CRKN), a Canadian collections consortium, carried out to determine the impact of the poor exchange rate on collections development and how libraries are coping with new budgetary pressures. Librarians from 33 universities provided survey responses. Of these, 22 participated in telephone interviews to further discuss concerns and ideas regarding the current crisis. The study finds that all participant libraries have taken actions to address the budgetary shortfall, including cancelling serial and database subscriptions, negotiating lower costs with vendors, purchasing fewer monographs, and soliciting additional funding from their institutions. While the financial strain resulting from exchange rate fluctuations is indeed a significant problem for which solutions should be sought, several respondents stressed that it only exacerbates the ongoing inflation of e-resource subscriptions. This deeper and enduring issue, which is expected to outlast the present exchange rate crisis, is enabled by an inherently flawed scholarly publishing system. Thus, librarians engaged in discussions with their wider academic communities concerning collections budgets should not focus exclusively on the exchange rate but should leverage the opportunity to explore alternatives to the current scholarly communication model. If solutions exist, they will likely only be achieved through the support of faculty and university administrators, as well as cooperation among post-secondary institutions and library consortia. Au cours de l’année 2015 et au début 2016, les budgets des collections des bibliothèques universitaires canadiennes ont connu d’importantes restrictions en partie causées par la baisse du dollar canadien face au dollar américain. La plupart des frais d’abonnements aux ressources électroniques sont en dollar américain ce qui signifie que le pouvoir d’achat des bibliothèques a été significativement réduit face à la dévalorisation du dollar canadien. Cette étude utilise un sondage auprès des établissements anglophones qui sont membres du Réseau canadien de documentation pour la recherche (RCDR), un consortium canadien pour les collections, afin de mieux connaître l’impact du faible taux de change sur le développement des collections et sur la façon dont les bibliothèques s’adaptent à de nouvelles pressions budgétaires. Des bibliothécaires de 33 universités ont répondu au sondage. Parmi ceux-ci, 22 ont participé à des entrevues téléphoniques pour discuter davantage de préoccupations et d’idées concernant la crise actuelle. L’étude montre que toutes les bibliothèques participantes ont pris des mesures pour contrer l’insuffisance budgétaire incluant l’annulation d’abonnements de périodiques et de bases de données, la négociation de coûts inférieurs avec les fournisseurs, l’achat de moins de livres ainsi que la sollicitation de financement additionnel auprès de leur institution. Quoique ce stress financier causé par les fluctuations du taux de change représente un sérieux problème pour lequel il faut trouver des solutions, plusieurs répondants ont réitéré que cette réalité ne fait qu’aggraver l’inflation continue des abonnements aux ressources électroniques. Cet enjeu sérieux et persistant, qui risque de perdurer au-delà la crise du taux d’échange actuel, est le résultat d’un système de communication savante défaillant. Les bibliothécaires qui discutent avec leur communauté universitaire au sujet des budgets de collections ne devraient pas se concentrer uniquement sur le taux de change mais devraient en profiter pour explorer des alternatives au modèle de communication savante actuel. Si des solutions existent, elles se réaliseront seulement avec l’appui des professeurs et des administrateurs ainsi qu’avec la coopération entre les établissements postsecondaires et les consortiums des bibliothèques.