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arXiv · 2103.02783

Financial Application of Extended Residual Coherence

Xuze Zhang·Benjamin Kedem
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Abstract

Residual coherence is a graphical tool for selecting potential second-order interaction terms as functions of a single time series and its lags. This paper extends the notion of residual coherence to account for interaction terms of multiple time series. Moreover, an alternative criterion, integrated spectrum, is proposed to facilitate this graphical selection. A financial market application shows that new insights can be gained regarding implied market volatility.

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Xuze Zhang, Benjamin Kedem. 2021-03-04. Financial Application of Extended Residual Coherence. https://arxiv.org/abs/2103.02783

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