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Potential Sources of the Long Memory Property in the Volatility Process of Daily KRW-USD Exchange Rates : Jumps and Structural Breaks

한영욱
보험연구원 (Korea Insurance Research Institute)|2011.02|보험금융연구 (Journal of Insurance and Finance)|제22권 제1호|pp. 137-163

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참고문헌

키워드

구조적 변화structural breakslong memory property장기기억 특성adaptive FIGARCH modelBernoulli jump processdaily KRW-USD foreign exchange ratesFIGARCH model일별 원-달러 환율
주제분류경영학

초록

This paper analyzes the potential sources driving the long memory property in the volatility process of the daily Korean Won (KRW)-US Dollar (USD) exchange rates. Based on the Adaptive FIGARCH model and the jump diffusion model, this paper proposes a new specification of the volatility process, which links the long memory property to jumps and structural breaksall together rather than separately as in previous studies. The model is estimated with the daily data on the KRW-USD exchange rate returns between 1999 and 2007. The empirical results show strong evidence that the Adaptive FIGARCH model combined with the Bernoulli jump process which takes into account the jumps and the structural breaks jointly could explain almost all of the long memory property in the volatility of the KRW-USD exchange returns. The implication is that both the structural breaks and the jumps are the major sources of the long memory property in the volatility.

Abstract

This paper analyzes the potential sources driving the long memory property in the volatility process of the daily Korean Won (KRW)-US Dollar (USD) exchange rates. Based on the Adaptive FIGARCH model and the jump diffusion model, this paper proposes a new specification of the volatility process, which links the long memory property to jumps and structural breaksall together rather than separately as in previous studies. The model is estimated with the daily data on the KRW-USD exchange rate returns between 1999 and 2007. The empirical results show strong evidence that the Adaptive FIGARCH model combined with the Bernoulli jump process which takes into account the jumps and the structural breaks jointly could explain almost all of the long memory property in the volatility of the KRW-USD exchange returns. The implication is that both the structural breaks and the jumps are the major sources of the long memory property in the volatility.

참고문헌 (44)

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관련 논문AI추천

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