Long memory volatility dependency, temporal aggregation and the Korean currency crisis: the role of a high frequency Korean won (KRW)-US dollar ($) exchange rate

Using a new type of 5 min high frequency dataset consisting of real time Korean won (KRW)-US dollar ($) exchange rates, this paper characterizes the volatility process of high frequency returns. The semi-parametric local Whittle estimation is applied to estimate the long memory dependency in the volatility process of the 5 min KRW-$ returns and the temporally aggregated returns data. The estimation results present that the underlying long memory dependency in the volatility process appears to be generally consistent across various temporally aggregated returns and that the exogenous shocks and the multiple breaks associated with the crisis in the market seem to induce greater long memory dependency during the crisis.