Evt And Exchange Rate Fluctuations

Exchange Rate Fluctuations and Fundamentals Distribution: An EVT Approach
Dinu Mathew Panampunna

Introduction
Exchange appraise returns exhibit diffusions with fat tinctures and the occurrence of total market
movements is to a greater extent than that typically experienced in a normal distribution. in that location has been
extensive empirical examination o f extreme swings in currency prices and to the reasons behind
these phenomena. Standard telephone exchange tread models efficacy suggest to the possibility that this might
stem from the nature of the fundamentals distributions or is caused by the error term. This
assumes that within standard monetary macro instruction -economic models, the implied distribution of the
macroeconomic variables can exhibit the heavy pursue blow, e ven if the noise term has a
distribution with no tails. This relates eventually to the theoretical possibility that the fat track nature
of the exchange rate returns is driven by the tail behavior of the underlying economic
fundamentals.
The to a greater extent intriguing question that needs to be addressed in the demonstrate work would be the fact
that the presence of fat tail distribution in exchange rate returns as come up as its fundamentals might
not still result in the relationship that the fat tails in the fundamentals influenced the similar
feature in the exchange rates.



The study would also attempt to work out monetary models to
explain this effect.
Statement of the problem
Dramatic movement of exchange rates not only has eminent impact on the respective national
economy, but also rattles the global financial markets. The study attempts to understand
exchange rate dynamics from its underlying fundamentals and to present a theoretical and
empirical exposition to further understanding.
Objectives of the Study
The study objectives of the study are as to whether,
a) The fat tailed distribution of exchange rate returns are caused by the fat tailed nature of
fundamentals
b) The convolution theorem and the consequent invariance...If you want to get a full essay, order it on our website: Ordercustompaper.com



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