평균회귀 이자율 차이와 연속시간 유위험이자율평가 모형

Abstract

This study investigates to what extent can an exchange rate built on continuous-time uncovered interest parity match the empirical features of the exchange rate and the interest differential data. In continuous-time, UIP is a stochastic differential equation and its solution provides the log of exchange rate as a nonlinear function of the exogenous interest differential. To obtain solution for the differential equation, I considers the case in which the interest differential follows mean-reversion process. Simulation experiments show that the model is capable of matching many important features of the data. The model is able to produce persistent dynamics of interest differential and fat-tails in exchange rate returns. Also the model is capable of endogenously producing ARCH effects in the exchange rate returns.