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To Study the Volatility of Malaysian Ringgit/ US Dollar Exchange Rate<br />

Nur Ain Binti Ariffin<br />

Supervisor: Dr. Hanafi Bin A.Rahim<br />

Bachelor of Science (Financial Mathematics)<br />

School of Informatics and Applied Mathematics<br />

Exchange rates are important financial problem that is receiving attention globally. The<br />

aim of this study is to evaluate the volatility of daily Malaysian Ringgit/ US Dollar<br />

(MYR/USD) exchange rate using. In this study, the daily data over the period Jan 1 st<br />

2008 to Jan 1st 2018 consisting of 2610 observations. The Durbin-Watson and Ljung-Box<br />

are used to test the existence of autocorrelation. Besides that, the Lagrange Multiplier<br />

Test are also used to detect the existence of ARCH. This research used several volatility<br />

model such as ARCH (1), GARCH (1,1) and GJR-GARCH (1,1) to model the return series.<br />

The modelling and forecasting performances are compared using the Akaike Information<br />

Criterion (AIC) and Bayesian Information Criterion (BIC). Based on the result, GARCH<br />

(1,1) is the best model to forecast the MYR/USD exchange rate returns.<br />

851 | UMT UNDERGRADUATE RESEARCH DAY 2018

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