Multivariate Diagonal FIGARCH: Specification, Estimation and Application to Modelling Exchange Rates Volatility
CEU Dept. of Economics Working Paper No. 5/2001
27 Pages Posted: 28 Jun 2001
Date Written: June 2001
Abstract
This paper extends the FIGARCH long-memory volatility model to a multivariate framework. The proposed quasi maximum likelihood estimator for the parameters of the model is analyzed through Monte Carlo simulations and is found to perform satisfactorily. A trivariate specification is applied for modelling jointly the daily volatility of foreign exchange rates of the German mark, British pound and Japanese yen against the U.S. dollar. The empirical example shows the relevance of the model and its suitability for practical risk applications.
JEL Classification: C15, C22, F31
Suggested Citation: Suggested Citation
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