Modelling volatility in the currency using stochastic models (GARCH and EGARCH)

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dc.contributor.authorMwania, Richard Emmanuel
dc.date.accessioned2022-02-07T15:50:57Z
dc.date.available2022-02-07T15:50:57Z
dc.date.issued2021
dc.descriptionSubmitted in partial fuHilment of the requirements for the Degree of Bachelor of Business Science in Financial Economics at Strathmore University.en_US
dc.description.abstractThis study looks into modelling variations in the rate of exchange by utilizing stochastic models. To do this, there are two models we focused on. The two models that are utilized in this study are the GARCH model and the EGARCH model. First, we test for thepresence of arch effects in order to know whether these models would be applicable in modelling the volatility of the exchange rates. In addition, for us to 'know whieh order of GARCH and EGARCH model to use, we com.pared the information criteria for the differentorder·GARCH and·EGARCH models and -chose the one which had the smallest information criteria. From the results we obtained by modelling volatility using both the GARCH and EGARCH models, we notice that the EGARCH model gives us superior results when compared to GARCH. This is because there is presence of asyrrimetric effects when modelling volatility of the exchange rates which is evident by the gamma coefficient being statistically significant. Hence, EGARCH .is preferred when modelling volatility in the exchange rates of the currenciesen_US
dc.identifier.urihttp://hdl.handle.net/11071/12614
dc.language.isoenen_US
dc.publisherStrathmore Universityen_US
dc.titleModelling volatility in the currency using stochastic models (GARCH and EGARCH)en_US
dc.typeUndergraduate Projecten_US
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