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A Study On The Stochastic Modeling And Jumping Behavior Of AUD / USD Exchange Rate

Posted on:2014-06-16Degree:MasterType:Thesis
Country:ChinaCandidate:W ShiFull Text:PDF
GTID:2279330434466248Subject:Financial project management
Abstract/Summary:PDF Full Text Request
Although the history of foreign exchange market is relatively short compared to the stock market, it has become the one of the most actively traded market for its24-hour trading operation. Global foreign exchange market turnover was20%higher in April2010than in April2007. The increase was driven by the48%growth in turnover of spot transactions. As regards counterparties, the higher global foreign exchange market turnover is associated with the increased trading activity of non-reporting banks, hedge funds, pension funds, mutual funds, insurance companies and central banks.Risk-aversed investors turned to strong currency such as dollars, yen, Swiss franc, Australian dollar. During the crisis, the trading amount related to AUD/USD increased by22%against the decline in that of Euro. Sustained economic growth, low debt ratio and a relatively high rate of return makesAustralian dollar the ad hoc to both the institutional and individual investors.This article mainly discusses about the behavior of AUD/USD, which is composed by three parts:Ⅰ. The statistical attributes of spot AUD/USD sequence and its stylized facts,Ⅱ. A jump-diffusion process with levy jumps constructed to depict "fat tail" phenomenon in AUD/USD and parameters of the model by the moment estimation method.Ⅲ. Non-parametric jump test based on the realized bipower variance is applied to5-minute high frequency sample of AUD/USD to subtract a jump sequence with arrival time and amplitude.The non-parametric jump test is powerful in detecting jumps, and the result is also a validation for the benefit of the introduction of jump process.
Keywords/Search Tags:AUD/USD, Geometric Levy Jump-Diffusion processNonparametric Jump Test
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