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Climate risks and realized volatility of major commodity currency exchange rates

Matteo Bonato, Oguzhan Cepni, Rangan Gupta and Christian Pierdzioch

Journal of Financial Markets, 2023, vol. 62, issue C

Abstract: We find that climate-related risks forecast the intraday data-based realized volatility of exchange rate returns of eight major fossil fuel exporters (Australia, Brazil, Canada, Malaysia, Mexico, Norway, Russia, and South Africa). We study several metrics capturing risks associated with climate change, derived from data directly on variables such as, for example, abnormal patterns of temperature. We control for various other moments (realized skewness, realized kurtosis, realized upside and downside variance, realized upside and downside tail risk, and realized jumps) and estimate our forecasting models using random forests, a machine learning technique tailored to analyze models with many predictors.

Keywords: Climate risks; Commodity currency exchange rates; Realized variance; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 F31 Q54 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Climate Risks and Realized Volatility of Major Commodity Currency Exchange Rates (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:62:y:2023:i:c:s1386418122000519

DOI: 10.1016/j.finmar.2022.100760

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