This chapter reviews the rapid advances in foreign exchange volatility modeling made in the last three decades. Academic researchers have sought to fit the three major characteristics of foreign exchange volatility: intraday periodicity, autocorrelation and discontinuities in prices. Early...

This paper determines the most appropriate ways to model diffusion and jump features of exchange rates. Simulations show that intraday periodicity in volatility prevents conventional tests from accurately identifying the frequency and location of jumps. We propose a two-stage correction for this...