The dynamics of exchange rate volatility: A multivariate latent factor ARCH model
研究七种名义美元即期汇率的波动模式，使用多元潜在因子ARCH模型，发现因子结构能有效捕捉汇率波动的共同性。
Abstract We study temporal volatility patterns in seven nominal dollar spot exchange rates, all of which display strong evidence of autoregressive conditional heteroskedasticity (ARCH). We first formulate and estimate univariate models, the results of which are subsequently used to guide specification of a multivariate model. The key element of our multivariate approach is exploitation of factor structure, which facilitates tractable estimation via a substantial reduction in the number of parameters to be estimated. Such a latent‐variable model is shown to provide a good description of multivariate exchange rate movements: the ARCH effects capture volatility clustering, and the factor structure captures commonality in volatility movements across exchange rates.