Wing Hong Chan
Conditional Correlated Jump Dynamics in Foreign Exchange (ABSTRACT)
published: 2004 | Research publication | Refereed Journals - Economics
Chan, W.H. (2004). "Conditional Correlated Jump Dynamics in Foreign Exchange". Economics Letters, 83, 23-28.
ABSTRACT: This paper develops a new bivariate model to study correlated jump dynamics in foreign exchange returns. The model extends a GARCH parameterization to include a bivariate correlated jump process with autoregressive intensities. The conditional covariance matrix has the BEKK structure, while the bivariate jumps are governed by a Correlated Bivariate Poisson (CBP) function. Using daily data of the Canadian dollar and Japanese Yen against the U.S. dollar, we find currency return correlation is driven not only by the normal disturbances, but also by the characteristics of simultaneous jumps.
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revised Jan 28/05
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