Journal of Statistical and Econometric Methods

Rwanda Currency Market Risk Analysis: Evidence From Asymmetry Effects

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  • Abstract

     

    This study evaluates the presence and characteristics of the asymmetric effects and volatility clustering in Rwanda currency market. Under GARCH types model, Value at Risk models are estimated by assuming that the residuals follow normal, student t and skewed student t distributions. Backtesting results for symmetric and asymmetric models have been done based on Kupiec and Christoffersen test. The results from Backtesting show that most accurate VaR estimate are obtained from asymmetry GARCH models and provide evidence on the existence of the asymmetric effect in the Rwanda currency market and the other currencies.


    JEL classification numbers: C22, C49, C52, E44


    Keywords: currency market, GARCH, asymmetric effects, Value at Risk and Backtesting.