Exchange Rate Risk and High Frequency Financial Data

Abstract Book of the 11th International Conference on Research in Business, Management and Economics

Year: 2026

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Exchange Rate Risk and High Frequency Financial Data

Prof. Dr. A. Can Inci

ABSTRACT:

In today’s world of globally integrated financial markets, 24-hour trading, and ultra-high speed transactions, continuous-time stochastic processes provide the natural theoretical medium for the design of financial models. The empirical tests and comparisons of these models are best understood if high sampling frequency data are used. Such high frequency intraday data would better accommodate different stochastic characteristics such as continuous movements or jump components. In contrast, low frequency weekly, monthly, or quarterly data may not capture and demonstrate the benefits of dynamic stochastic processes with jumps since these instantaneous reactions may be smoothed out unintentionally. Even daily frequency data may suffer from this smoothing problem and not reproduce the accurate currency or interest rate dynamics. This study examines various dual-country multi-state nonlinear and affine stochastic models with currency and interest rate data of different sampling frequencies. The impact of high frequency sampling on the predictive ability of the stochastic models is explored.

Keywords: Exchange Rates, Stochastic Models, High Frequency Data, Big Data