Forecasts and Structures of Multiperiod Exchange Rate Volatility of the Colombian Peso

The Gaussian GARCH (1,1) model has traditionally been used for studying the exchange rate. However, an important number of recent studies, using FIGARCH and HYGARCH models, have found evidence for the persistence of exchange rate volatility. This study, using nested models, found evidence in favor of an IGARCH model under a GED distribution. The IGARCH model forecasts are used to calculate the term structure of multiperiod volatility, which lets us know the expectations of the market about the volatility of returns over different time horizons