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

See all articles by Karoll Gómez

Karoll Gómez

Universidad de Antioquia

Santiago Gallón

Universidad de Antioquia

Elkin Castaño

National University of Colombia

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

Gómez, Karoll and Gallón, Santiago and Castaño, Elkin, Forecasts and Structures of Multiperiod Exchange Rate Volatility of the Colombian Peso (August, 26 2008). Cuadernos de Economía, Vol. 27, No. 48, 2008, Available at SSRN: https://ssrn.com/abstract=1259246

Karoll Gómez (Contact Author)

Universidad de Antioquia ( email )

Calle 67 No. 53 108
Apartado Aereo
Medellin, 1226
Colombia

Santiago Gallón

Universidad de Antioquia ( email )

Calle 67 No. 53 108
Apartado Aereo
Medellin, 1226
Colombia

Elkin Castaño

National University of Colombia ( email )

Colombia

HOME PAGE: http://www.unalmed.edu.co/

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