Research On The Volatility Of RMB Exchange Rate

The exchange rate is an important research topic in the financial market.The volatility of the RMB exchange rate has gradually become a hot topic in the academic and practical circles.Discussing its time series law can not only enable us to successfully grasp its operational trends,but also provide a basis theory for avoiding exchange rate risks.In this paper,the jump diffusion model is used to describe the fluctuation rule of RMB exchange rate,and the non-parametric estimation method of error correction is studied.The emergence of major economic or political events in the macro market will cause sudden fluctuations in the RMB exchange rate,which is the phenomenon of large jump.Therefore,it is of great practical significance using the jump diffusion model to describe the fluctuation trend of the RMB exchange rate.The non-parametric estimation method with error correction:local linear kernel estimation and local polynomial estimation,has a good effect on solving the boundary error problem of traditional local constant estimation(NW estimation).The advantage of local polynomial estimator is the higher precision,and its robustness is better than the traditional symmetric nuclear method.The Monte Carlo simulation method is used to compare the NW estimation method with the error-corrected non-parametric estimation in this paper.The accuracy of NW estimation and local polynomial estimation is compared by different error dimensions and get conclusion:error-corrected local polynomial estimation method can effectively correct boundary error.By analyzing the empirical data of RMB exchange rate,the practical significance of the jump diffusion model is proved.The empirical data are estimated by three estimation methods,and the conclusions that local linear kernel estimation and local polynomial estimation are more accurate are obtained.In this paper,the jump diffusion model is adopted and the previous diffusion model is improved,which is more suitable for the actual situation.The non-parametric estimation method of error correction is selected,which solves the boundary correction problem of the traditional NW estimation method,and estimation accuracy is higher.About the empirical aspect:This paper expands the object to the RMB exchange rate while before the scholars generally choose to apply the diffusion model to the interest rate and estimate it,making the research on the exchange rate more comprehensive.In summary,the error-corrected nonparametric estimation method applied to the jump diffusion model will help to guide the prediction of the exchange rate of each currency against the RMB,thus playing a more effective role in RMB exchange rate risk management.