The Duration Effect on the Volatility of Intraday Exchange Rates in Taipei FX Market: An Application of EACD-FIGARCH Model

The purpose of this study is to investigate the volatility dynamics of the exchange rates in Taipei foreign exchange market. The EACD-FIGARCH is employed to examine the relationship between the trading duration and the price volatility in the foreign exchange market. The empirical results reveal that the volatility of JPY/USD, JPY/DEM and DEM/USD exchange rates in Taipei is affected by the trading durations of their corresponding exchange rates in Taipei, respectively. The empirical results also indicate that there is weak long memory dependence in volatility process in Taipei foreign exchange market.