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Evidence of time-varying conditional discrete jump dynamics in sub-Saharan African foreign exchange markets

Saint Kuttu, Anthony Q.Q. Aboagye and Godfred A. Bokpin

Research in International Business and Finance, 2018, vol. 46, issue C, 211-226

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.

Keywords: Conditional jumps; Poisson process; ARJI-GJRGARCH; Sub-Saharan African foreign exchange markets (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
Date: 2018
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