In this paper we develop an empirical model of exchange rates in a target zone. The model is general enough to nest most theoretical and empirical models in the existing literature. We find evidence of two types of jumps in exchange rates. Realignment jumps are those that are associated with the...

This paper explores whether volatility linkages exist at the intra-daily frequency in the foreign exchange market, and whether market trading hours affect volatility transmission. To answer these questions, we apply the Fleming, Kirby and Ostdiek model (1998) to 21 currency pairs using hourly...