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

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

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.

Suggested Citation

  • Kuttu, Saint & Aboagye, Anthony Q.Q. & Bokpin, Godfred A., 2018. "Evidence of time-varying conditional discrete jump dynamics in sub-Saharan African foreign exchange markets," Research in International Business and Finance, Elsevier, vol. 46(C), pages 211-226.
    • Handle: RePEc:eee:riibaf:v:46:y:2018:i:c:p:211-226
    DOI: 10.1016/j.ribaf.2018.02.005
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    More about this item

    Keywords

    Conditional jumps; Poisson process; ARJI-GJRGARCH; Sub-Saharan African foreign exchange markets;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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