Nonparametric and Semiparametric Models
In the previous chapter we have seen that parametric ARCH models have to a large extent the capability to explain the features of FX rate volatility. The GARCH model fit outperformed the IGARCH and EGARCH model fits. Based on this analysis one might conclude that the conditional variance of FX returns is neither integrated (permanent memory), nor asymmetric. To show that this conclusion would be rash is the objective of this chapter.
KeywordsCovariance Resid Autocorrelation Volatility Estima
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