Modelling Foreign Exchange Realized Volatility Using High Frequency Data : Long Memory Versus Structural Breaks

In this study, we model realized volatility constructed from intraday high-frequency data. We explore the possibility of confusing long memory and structural breaks in the realized volatility of the following spot exchange rates: EUR/USD, EUR/JPY, EUR/CHF, EUR/GBP, and EUR/AUD. The results show evidence for the presence of long memory in the exchange rates' realized volatility. From the Bai – Perron test, we found structural breakpoints that match significant events in financial markets. Furthermore, the findings provide strong evidence in favour of the presence of long memory