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An empirical analysis on Euro Hungarian forint exchange rate volatility using garch

The paper aims to analyse and forecast the Euro Hungarian Forint exchange rate volatility with the use of generalized autoregressive conditional heteroscedasticity GARCH- type models over the time period from September 30, 2010 to January 02, 2017. | An Giang University Journal of Science – 2017, Vol. 5 (2), 40 – 50 AN EMPIRICAL ANALYSIS ON EURO HUNGARIAN FORINT EXCHANGE RATE VOLATILITY USING GARCH Ngo Thai Hung1 1 Corvinus University of Budapest, Hungary Information: Received: 18/04/2017 Accepted: 24/05/2017 Published: 06/2017 Keywords: Volatility, GARCH, EURHUF, Volatility forecast ABSTRACT The paper aims to analyse and forecast the Euro Hungarian Forint exchange rate volatility with the use of generalized autoregressive conditional heteroscedasticity GARCH- type models over the time period from September 30, 2010 to January 02, 2017. This model is the extension of the ARCH process with various features to explain the obvious characteristics of financial time series such as asymmetric and leverage effect. As we apply EUR/HUB with this model, the estimation and forecast are performed. The end of easing cycle is expected to result in a stable forint in the coming quarters. However, the currency is likely to face slight upward pressure from Brexit related uncertainties. The EUR/HUF is likely to trade at 322 by the end of 2016, stated Commerzbank. Persistent low inflation is expected to renew rate cut expectations in the coming year. Such a development, combined with an expected deceleration of the GDP growth in 2016, is expected to exert upward pressure on the EUR/HUF pair by the end of 2016”. Therefore, the investigation of the volatility of the Euro Hungarian Forint exchange rate is in need. 1. INTRODUCTION During recent years, the study of the volatility of a market variable measuring uncertainty about the future value of the variable plays a prominent part in monitoring and assessing potential losses. Quantitative methods measure the volatility of the Euro Hungarian Forint exchange rate received the high interest because of its role in determining the price of securities and risk management. Typically, a series of financial indices have different movements under certain period. This means that the .