Evidence of time-varying conditional discrete jump dynamics in sub-Saharan African foreign exchange markets
Date
2018-12
Authors
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Publisher
Research in International Business and Finance
Abstract
An Autoregressive Jump Intensity-GJRGARCH model is used to examine the time-varying conditional discrete jump dynamics in the foreign exchange markets of Ghana, Kenya, Nigeria and South Africa. The findings suggest that conditional discrete jump is time-varying, and time-varying conditional discrete jump is sensitive to past shocks for all the four countries’ foreign exchange markets. Time-varying conditional discrete jump sensitivity is persistent in all the four markets, and all four markets exhibit asymmetric time-varying conditional discrete jump volatility. We also find that all the foreign exchange markets exhibit asymmetry in volatility, the so-called leverage effects. The findings shed some light on the volatility in these markets which are very relevant for hedging, portfolio allocation, pricing of currency derivatives and forecasting.
Description
Keywords
Conditional jumps, Poisson process, ARJI-GJRGARCH, Sub-Saharan African foreign exchange markets