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This paper proposes to model the error term in smooth transition autoregressive target zone model as Gaussian with stochastic volatility (STARTZ-SV) or as Student-t with GARCH volatility (STARTZ-TGARCH). Using the dynamics of Norwegian krone exchange rate index, we show that both models produce...
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. Using the theory of stochastic differential equation (SDE) in probability theory, we calculate the probabilities that the …
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