Arbeitspapier

Modelling exchange rates volatility with multivariate long-memory ARCH processes

We consider two multivariate long-memory ARCH models, which extend the univariate long-memory ARCH models, we first consider a long-memory extension of the restricted constant conditional correlations (CCC) model introduced by Bollerslev (1990), and we propose a new unrestricted conditional covariance matrix model which models the conditional covariances as long-memory ARCH processes. We apply these two models to two daily returns on foreign exchanges (FX) rates series, the Pound-US dollar, and the Deutschmark-US dollar. The estimation results for both models show: (i) that the unrestricted model outperforms the restricted CCC model, and (ii) that all the elements of the conditional covariance matrix share the same degree of long-memory for the period April 1979 - January 1997. However, this result does not hold for the floating periods March 1973 - January 1997 and September 1971 - January 1997. This break in the long-term structure may be caused by the European Monetary System inception in March 1979.

Language: Englisch

Bibliographic citation: Series: SFB 373 Discussion Paper ; No. 1999,5

Classification: Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Financial Economics: General

Subject: heteroskedasticity
Long-memory processes
multivariate long-memory ARCH models
multivariate FIGARCH models

Event: Geistige Schöpfung

(who): Teyssière, Gilles

Event: Veröffentlichung

(who): Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

(where): Berlin

(when): 1999

Handle: http://hdl.handle.net/10419/61735

URN: urn:nbn:de:kobv:11-10056020

Last update: 10.03.2025, 11:42 AM CET

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Object type

Arbeitspapier

Associated

Teyssière, Gilles
Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Time of origin

1999

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