Stochastic autoregressive volatility model for exchange rates

Nittaya McNeil*, Don McNeil, Nino Kordzakhia

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

A discrete time model for asset price changes is considered. The volatility process underlying these changes is modeled as a first-order Gaussian autoregressive series. Inversion of the marginal characteristic function of the return process simplifies the assessment of the tail behaviour of the probability density function of returns. The Generalized Method of Moments (GMM) is used to calibrate the model and implement an overidentification test. Daily Euro/USD, Pound/USD, AUD/USD, and Yen/USD exchange rates over the period January 1999 to October 2006 are used to illustrate the methods.

Original languageEnglish
Pages (from-to)799-804
Number of pages6
JournalSongklanakarin Journal of Science and Technology
Volume30
Issue number6
Publication statusPublished - 2008
Externally publishedYes

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