TY  - JOUR
AU  - Andersen,Torben
AU  - Bollerslev,Tim
AU  - Diebold,Francis X.
AU  - Labys,Paul
TI  - The Distribution of Exchange Rate Volatility
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6961
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6961
L1  - http://www.nber.org/papers/w6961.pdf
N1  - Author contact info:
Torben G. Andersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1285
Fax: 847/491-5719
E-Mail: t-andersen@kellogg.northwestern.edu

Tim Bollerslev
Department of Economics
Duke University
Box 90097
Durham, NC 27708-0097
Tel: 919/660-1846
Fax: 919/684-8974
E-Mail: boller@econ.duke.edu

Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu

Paul Labys
Dept. of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA 19104-6297
E-Mail: plabys@crai.com
AB  - Using high-frequency data on Deutschemark and Yen returns against the dollar, we construct model-free estimates of daily exchange rate volatility and correlation, covering an entire decade.  In addition to being model-free, our estimates are also approximately free of measurement error under general conditions, which we delineate.  Hence, for all practical purposes, we can treat the exchange rate volatilities and correlations as observed rather than latent.  We do so, and we characterize their joint distribution, both unconditionally and conditionally.  Noteworthy results include a simple normality-inducing volatility transformation, high contemporaneous correlation across volatilities, high correlation between correlation and volatilities, pronounced and highly persistent temporal variation in both volatilities and correlation, clear evidence of long-memory dynamics in both volatilities and correlation remarkably precise scaling laws under temporal aggregation.
ER  -