The Jump Behavior of Foreign Exchange Market: Analysis of Thai Baht
Journal
Review of Pacific Basin Financial Markets and Policies
Journal Volume
10
Journal Issue
2
Pages
265-288
Date Issued
2007
Date
2007
Author(s)
Abstract
We study the heteroskedasticity and jump behavior of the Thai baht using models of the square root stochastic volatility with or without jumps. The Bayesian factor is used to evaluate the explanatory power of competing models. The results suggest that in our sample, the square root stochastic volatility model with independent jumps in the observation and state equations (SVIJ) has the best explanatory power for the 1996 Asian financial crisis. Using the estimation results of the SVIJ model, we are able to link the major events of the Asian financial crisis to jump behavior in either volatility or observation. ? 2021 by World Scientific Publishing Co. Pte. Ltd.
Subjects
Asian financial crisis; Bayesian factor; Heteroskedasticity; Jump; Stochastic volatility model with independent jumps
Type
journal article
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