ASYMMETRIC GARCH-TYPE AND HALF-LIFE VOLATILITY MODELLING OF USD/KZT EXCHANGE RATE RETURNS

Authors : Mert URAL, Erhan DEMIRELI

Pages : 7-18

View : 28 | Download : 6

Publication Date : 2020-07-15

Article Type : Research Paper

Abstract :Empirical studies have shown that a large number of financial assets returns exhibit fat tails insert ignore into journalissuearticles values(leptokurtosis); and are often characterized by volatility clustering and asymmetry. This paper considers the ability of the asymmetric GARCHtype models to capture the stylized features of volatility in USD/KZT exchange rate returns. Therefore, the half-life parameter of the USD/KZT returns series were calculated for three sub-periods. The results revealed that the half-life was 6 days, 16 days and 12 days for 1st sub-period, 2nd sub-period and 3rd sub-period respectively. According to the results, in the presence of asymmetric responses to innovations in the Kazakhstan foreign exchange market, the EGARCH insert ignore into journalissuearticles values(1.1);-GED model which accommodates the kurtosis of financial time series is preferred. Also, these results show that the USD/KZT exchange rate returns have strong mean reversion and short half-life.
Keywords : EGARCH, GJRGARCH, APGARCH, USD KZT exchange rate, Half life volatility