COMESA Monetary Institute has developed a manual for modelling and forecasting volatility in financial markets.
The manual which has now been validated will serve as a knowledge product to provide member States’ Central Banks with an analytical guide in modeling and forecasting volatility in financial markets within a multivariate framework.
The development of the manual follows a decision by the COMESA Committee of Governors of Central Banks during their 22nd meeting held in Bujumbura, Burundi in March, 2017.
Delegates from Burundi, Djibouti, DR Congo, Egypt, Ethiopia, Kenya, Mauritius, Sudan, Swaziland, Uganda, Zambia and Zimbabwe reviewed and provided feedback on the manual during a validation workshop organized by the COMESA Monetary Institute in Nairobi from 24th to 28th April, 2017. The Director of the CMI Mr. Ibrahim Zeidy officially opened the workshop and emphasized the need to develop capacity in modeling and forecasting especially for financial markets.
“Investors and portfolio managers have threshold levels of risk they can bear and at policy level.” Mr. Zeidy stated. “Financial market volatility and the associated volatility spillovers are a potential threat to financial stability and can potentially dampen prospects for economy-wide growth.”
He noted that a good understanding of volatility and a robust forecast of the same over the asset holding period was a prerequisite for assessing risk levels associated with investment in a financial asset and also importantly, monetary policy makers rely on the estimates of volatility as a barometer for the vulnerability of financial markets and the economy.
The Director said; “The manual on modelling and forecasting volatility in a multivariate framework is intended to provide step by step guide to central banks modellers to enable them adequately measure and forecast both direct and spill-over effects due to volatility in prices of financial market assets.”
He added that the resulting rigorous and robust volatility analysis should enable decision makers to undertake measures to mitigate the adverse effects of financial markets uncertainty.