LONG MEMORY IN CURRENCY FUTURES VOLATILITY

Abstract

This study employs a new time series representation of persistence in conditional mean and variance to test for the existence of the long memory property in the currency futures market. Empirical results indicate that there exists a fractional exponent in the differencing process for foreign currency futures prices. The series of returns for these currencies displays long-term positive dependence. A hedging strategy for long memory in volatility is also discussed in this article to help the investors hedge for the exchange rate risk by using currency futures.

Citation

Chung, C.-F., Hung, M.-W. and Liu, Y.-H. (2003), "LONG MEMORY IN CURRENCY FUTURES VOLATILITY", Research in Finance (Research in Finance, Vol. 20), Emerald Group Publishing Limited, Leeds, pp. 139-158. https://doi.org/10.1016/S0196-3821(03)20008-3