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The conditional heteroscedasticity of the yen–dollar exchange rate

✍ Scribed by Y. K. Tse

Publisher
John Wiley and Sons
Year
1998
Tongue
English
Weight
108 KB
Volume
13
Category
Article
ISSN
0883-7252

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✦ Synopsis

This paper examines the conditional heteroscedasticity of the yen±dollar exchange rate. A model is constructed by extending the asymmetric power autoregressive conditional heteroscedasticity model to a process that is fractionally integrated. It is found that, unlike the equity markets, the appreciation and depreciation shocks of the yen against the dollar have similar eects on future volatilities. Although the results reject both the stable and the integrated models, our analysis of the response coecients of the past shocks and the application of the models to the estimation of the capital requirements for trading the currencies show that there are no substantial dierences between the fractionally integrated models and the stable models.

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