Conclusions and Outlook

Abstract

Volatility is the predominant factor of financial decisions in present time. As was argued in the introduction of this thesis, one important reason is the general tendency towards liberalization of financial markets with freefloating asset prices and exchange rates. Even the currencies in the European Monetary System are effectively freefloating since August 1993, because the 15% variability band was more a symbol than a serious restriction. Of course this will change again, once the European Monetary Union will be established by political decisions. However, volatility of the three main currency blocks, i.e. Dollar, Euro and Yen, is very likely to remain on a high level due to the discrepancies of the macroeconomic policies in these regions. Therefore, a correct understanding of the dynamic properties of volatility is crucial for reliable prediction of financial time series, which serves as the basis for policymaking.