Comparative Analysis of Exchange Rate Volatility Forecasting and Value at Risk Measurement Using GARCH-Type Models: An Empirical Study Based on Major Reserve Currency Pairs

DOI

10.2991/978-94-6239-642-5_35How to use a DOI?

Keywords

GARCH-type Mdels; Value at Risk; Prediction; Exchange Rate

Abstract

This study compares the performance of GARCH(1,1), EGARCH(1,1), and GJR-GARCH(1,1) models in forecasting exchange rate volatility and estimating Value at Risk (VaR) for the major reserve currency pairs USD/EUR and USD/CNY. Using weekly return data from 2015 to 2025, the analysis shows that both series display fat tails, volatility clustering, and clear conditional heteroskedasticity. USD/CNY exhibits heavier tails and more persistent volatility. Based on maximum likelihood estimation and rolling-window forecasts, the asymmetric EGARCH and GJR-GARCH outperform the symmetric GARCH model. EGARCH delivers the most stable short-term volatility forecasts across both markets. Regarding distributional assumptions, the t-distribution improves the modelling of tail risks, especially for USD/CNY, although it introduces trade-offs for VaR stability during extreme events. Overall, the results highlight important differences between developed and emerging currency markets. They also provide practical guidance for selecting appropriate volatility models and distributional assumptions in exchange rate risk management.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Xinyi Ni
PY  - 2026
DA  - 2026/04/29
TI  - Comparative Analysis of Exchange Rate Volatility Forecasting and Value at Risk Measurement Using GARCH-Type Models: An Empirical Study Based on Major Reserve Currency Pairs
BT  - Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026)
PB  - Atlantis Press
SP  - 337
EP  - 349
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-642-5_35
DO  - 10.2991/978-94-6239-642-5_35
ID  - Ni2026
ER  -