Application of Multivariate FIGARCH and FIAPARCH Models in the Analysis of Volatility of Exchange Rates, Gold and Oil Prices
Application of Multivariate FIGARCH and FIAPARCH Models in the Analysis of Volatility of Exchange Rates, Gold and Oil Prices

Summary/Abstract: The study applies multivariate FIGARCH and FIAPARCH volatility models with constant and dynamic conditional correlations to analyze the volatility of exchange rates of the US dollar against the euro and the Japanese yen, as well as the prices of gold and oil. The results reveal the presence of long memory in the volatility of all analyzed series, with dual long memory observed in the case of oil. An asymmetric reaction of oil and gold price volatility to "positive" and "negative" shocks is confirmed based on the applied FIAPARCH models, while such asymmetry is not supported for exchange rates. The applied multivariate volatility models reveal dynamic conditional correlations between exchange rates, gold, and oil prices, aiding optimal portfolio construction. The study identifies volatility spillovers from gold prices and the EUR-USD exchange rate to oil prices, as well as from the USD-JPY exchange rate to the EUR-USD exchange rate. Bidirectional spillovers are observed only between gold prices and the EUR-USD exchange rate.

• Details
• Contents