Craig, Ben R. (contributor); Keller, Joachim G. (contributor) - 2003 - [Elektronische Ressource]
first calculate the instantaneous volatility of the spot, ˆσ
t
(X,τ,
b
β), a function of
the state of the exchange rate … the diffusion process
with ∆h: equally spaced absolute value of the underlying in DM/US-$ exchange rate
β
~
))
~
,,(max … autoregressive model.
The basic idea is to evaluate a sequence of actual exchange rate realizations
{X
t
}
N
t=1
with respect to a …