MODELLING VOLATILITY OF KES/USD EXCHANGE RATES USING TIME SERIES MODELS (A CASE STUDY OF THE KENYAN EXCHANGE RATES

Abstract

ABSTRACT Research work examines the accuracy and forecasting performance of volatility models for the KES/USD exchange rate return in Kenya using the EGARCH and TARCH. In fitting these models to the daily and monthly exchange rate returns data collected from CBK which extended from the period January 2008 to December 2015, In this study, performance of Time series models ( asymmetric EGARCH and TARCH models) in forecasting the volatility behavior of Kenya FOREX market was examined. Daily FOREX rates data, ranging from January, 2008 to December, 2015 was put to statistical manipulation to examine the FOREX volatility behavior in Kenya.