New Methods in Currency Volatility Research: Insights from Prof. Soudeep Deb
Not too long ago, as the COVID-19 pandemic reshaped global financial landscapes, new ways to understand currency fluctuations emerged. The focus now shifted from traditional models to reimagining how we detect sudden shifts in a volatile global market.
Recent research from Prof. Soudeep Deb, Decision Sciences area; IIMB Ph.D. scholar M. Mareeswaran, Finance and Accounting area; and Shubhajit Sen, North Carolina State University, pushes the envelope by introducing a novel structural break detection approach. Their method, which combines t-SNE with non-parametric spectral density, offers an unprecedented look into the Indian rupee's performance against 4 global currencies— USD, GBP, EUR, and JPY. And the results? A stark shift in volatility, driven by pandemic-induced market shocks.
Our researchers go further, blending three GARCH models in an ensemble approach to refine the forecast accuracy—bringing in a first-of-its-kind methodology to the toolkit for exchange rate volatility analysis.
Curious to see how it plays out? Watch Prof. Deb’s full breakdown of the study!