Volatility Forecasting: HExp Model
Roman R.
In this series on volatility forecasting, I previously detailed the Heterogeneous AutoRegressive (HAR) volatility forecasting model that has become the workhorse of the volatility forecasting literature1 since its introduction by Corsi2. I will now describe an extension of that model due to Bollerslev et al.3, called the Heterogeneous Exponential (HExp) volatility forecasting model, in which the lagged HAR volatility components are exponentially - rather than arithmetically - averaged. In additi