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Measuring Volatility

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Submitted By suhashinij
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MEASURING TIME VARYING VOLATILITY OF USDINR CURRENCY FUTURES IN INDIA
*Suhashini.J ** Dr.Chandrasekar.K

*Suhashini.J, Faculty Research Scholar, PSNA College of Engineering and Technology, Dindigul, Tamilnadu.Suhashinij@gmail.com
**Dr.K.Chandrasekar, Assistant Professor, Alagappa Institute of Management, Alagappa University, Kariakudi.

MEASURING TIME VARYING VOLATILITY OF USDINR CURRENCY FUTURES IN INDIA
Abstract
This paper examines the volatility of USDINR currency pair. USDINR currency pair was introduced in regulated stock exchange of National Stock Exchange in the year 2008. USDINR currency stated to trade as a future instrument on 29.08.2008. Though it’s a delayed decision undertaken in India to introduce currency futures in regulated exchange within the three years of its introduction 10 times of volume traded has increased. The pricing of currencies is supposed to be dependent on volatility of the markets. Therefore it’s important to know the volatility implications of currency market to trade in futures market. To understand volatility implications it is examined using ARCH, GARCH, and GARCH (1, 1) model in this paper. The study finds the evidence of time varying volatility of futures. The study finds an evidence of time varying volatility, which exhibits clustering, high persistence and predictability of currency futures in Indian Market.

Key words: Time Varying Volatility, currency futures, USDINR and GARCH Introduction
Currency Futures has been selected as the object of study because of its fangled launching in 2008 in regulated stock exchanges. Most of the corporations, banks and traders, use forward contracts in India for their forex risk management. But now it paved way to individuals and retailers who can hedge their foreign exchange risks by trading in currency futures and options in recognized stock exchanges. Currency...

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