Jump-Diffusion Stochastic Volatility Model for Estimating the Returns of GBP/CNY Exchange Rates

Author

Yang, Ruicheng ; Wang, Fenglei ; Xia, Bing

Author_Institution

Sch. Math. & Inf., Ludong Univ., Yantai, China

Volume

1

fYear

2009

fDate

10-11 July 2009

Firstpage

463

Lastpage

466

Abstract

In this paper we discuss the volatility of daily returns of GBP/CNY exchange rates, find there exists a leptokurtic feature (higher peak and fat tail) that results from some occasional jumps. So, we introduce the jump-diffusion stochastic volatility model to describe the time series of daily returns, and give the parameter estimations by MLE (maximum likelihood estimation) method. Through the empirical analysis, we compare the simulated data to the real data, derive that the jump-diffusion stochastic volatility model can better fitting the time series of daily returns.

Keywords

econometrics; exchange rates; maximum likelihood estimation; stochastic processes; time series; GBP/CNY exchange rate return; MLE method; jump-diffusion stochastic volatility model; leptokurtic feature; maximum likelihood estimation; parameter estimation; time series; Analytical models; Discrete wavelet transforms; Exchange rates; Exponential distribution; Maximum likelihood estimation; Parameter estimation; Pricing; Stochastic processes; Tail; Time series analysis; Brownian motion; MLE; Poisson process; jump-diffusiont;

fLanguage

English

Publisher

ieee

Conference_Titel

Information Engineering, 2009. ICIE '09. WASE International Conference on

Conference_Location

Taiyuan, Shanxi

Print_ISBN

978-0-7695-3679-8

Type

conf

DOI

10.1109/ICIE.2009.74

Filename

5211329