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2016•Universal Journal of Computational MathematicsOpen access

Modeling the Volatility of US Dollar/Albanian Lekё Exchange Rate

Rozana Liko, Artion Kashuri

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Abstract

The aim of this paper is to investigate the volatility of USD/ALL daily exchange rate using generalized autoregressive conditional heteroscedasticity model. The data set used in this study cover a period from 5 January 2010 to 30 April 2015. Autoregressive conditional heteroscedasticity (ARCH), generalized autoregressive conditional heteroscedasticity (GARCH), threshold generalized autoregressive conditional heteroscedasticity (TGARCH), and exponential GARCH (EGARCH) model are applied to model the volatility of daily exchange rate return. The main result is that volatility of exchange rate return is affected by past volatility, and exchange return of USD/ALL is well modeled by this model.

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What this paper is about

The aim of this paper is to investigate the volatility of USD/ALL daily exchange rate using generalized autoregressive conditional heteroscedasticity model. The data set used in this study cover a period from 5 January 2010 to 30 April 2015. Autoregressive conditional heteroscedasticity (ARCH), generalized autoregressive conditional heteroscedasticity (GARCH), threshold generalized autoregressive conditional heteroscedasticity (TGARCH), and exponential GARCH (EGARCH) model are applied to model the volatility of daily exchange rate return. The main result is that volatility of exchange rate return is affected by past volatility, and exchange return of USD/ALL is well modeled by this model.

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Available abstract

The aim of this paper is to investigate the volatility of USD/ALL daily exchange rate using generalized autoregressive conditional heteroscedasticity model. The data set used in this study cover a period from 5 January 2010 to 30 April 2015. Autoregressive conditional heteroscedasticity (ARCH), generalized autoregressive conditional heteroscedasticity (GARCH), threshold generalized autoregressive conditional heteroscedasticity (TGARCH), and exponential GARCH (EGARCH) model are applied to model the volatility of daily exchange rate return. The main result is that volatility of exchange rate return is affected by past volatility, and exchange return of USD/ALL is well modeled by this model.

Key concepts: Volatility (finance), Liberian dollar, Economics, Monetary economics, Us dollar, Exchange rate, Econometrics, Finance

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