Forecasts and Structures of Multiperiod Exchange Rate Volatility of the Colombian Peso
Cuadernos de Economía, Vol. 27, No. 48, 2008
26 Pages Posted: 31 Aug 2008
Date Written: August, 26 2008
Abstract
The Gaussian GARCH (1,1) model has traditionally been used for studying the exchange rate. However, an important number of recent studies, using FIGARCH and HYGARCH models, have found evidence for the persistence of exchange rate volatility. This study, using nested models, found evidence in favor of an IGARCH model under a GED distribution. The IGARCH model forecasts are used to calculate the term structure of multiperiod volatility, which lets us know the expectations of the market about the volatility of returns over different time horizons.
Keywords: exchange rate, volatility, k-period volatility, GARCH, IGARCH, FIGARCH, HYGARCH, HYAPARCH, GED distribution
JEL Classification: C22, C51, C52, C53, F31
Suggested Citation: Suggested Citation
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