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We first formulate and estimate univariate models, the results of which are subsequently used to guide specification of a multivariate model. The key element of our multivariate approach is exploitation of factor structure, which facilitates tractable estimation via a substantial reduction in the number of parameters to be estimated. Such a latent\u2010variable model is shown to provide a good description of multivariate exchange rate movements: the ARCH effects capture volatility clustering, and the factor structure captures commonality in volatility movements across exchange rates.<\/jats:p>","DOI":"10.1002\/jae.3950040102","type":"journal-article","created":{"date-parts":[[2007,7,12]],"date-time":"2007-07-12T10:19:05Z","timestamp":1184235545000},"page":"1-21","source":"Crossref","is-referenced-by-count":462,"title":["The dynamics of exchange rate volatility: A multivariate latent factor ARCH model"],"prefix":"10.1002","volume":"4","author":[{"given":"Francis X.","family":"Diebold","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Marc","family":"Nerlove","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2006,8,8]]},"reference":[{"key":"e_1_2_1_2_1","doi-asserted-by":"publisher","DOI":"10.1109\/TAC.1974.1100705"},{"key":"e_1_2_1_3_1","volume-title":"Policies For Employment, Prices, and Exchange Rates","author":"Bilson J. F. O.","year":"1979"},{"key":"e_1_2_1_4_1","doi-asserted-by":"publisher","DOI":"10.1016\/0304-4076(86)90063-1"},{"key":"e_1_2_1_5_1","doi-asserted-by":"publisher","DOI":"10.2307\/1925546"},{"key":"e_1_2_1_6_1","unstructured":"Bollerslev T.(1987b) \u2018A multivariate GARCH model with constant conditional correlations for a set of exchange rates\u2019. Manuscript Northwestern University."},{"key":"e_1_2_1_7_1","doi-asserted-by":"publisher","DOI":"10.1086\/261527"},{"key":"e_1_2_1_8_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0022-1996(87)80025-9"},{"key":"e_1_2_1_9_1","unstructured":"Dickey D. A.(1976) \u2018Hypothesis testing for nonstationary time series\u2019. Ph.D. Dissertation Iowa State University Ames Iowa."},{"key":"e_1_2_1_10_1","doi-asserted-by":"publisher","DOI":"10.1080\/07474938608800096"},{"key":"e_1_2_1_11_1","doi-asserted-by":"publisher","DOI":"10.1007\/978-3-642-45641-1"},{"key":"e_1_2_1_12_1","unstructured":"Diebold F. X.andM. Nerlove(1987) \u2018Factor structure in a multivariate ARCH model of exchange rate fluctuations\u2019 in Tarmo Pukkila and Simo Puntanen (eds) Proceedings of the Second International Tampere Conference in Statistics pp.429\u2013438. Department of Mathematical Sciences\/Statistics University of Tampere Tampere Finland."},{"key":"e_1_2_1_13_1","doi-asserted-by":"publisher","DOI":"10.1016\/0014-2921(88)90033-5"},{"key":"e_1_2_1_14_1","doi-asserted-by":"publisher","DOI":"10.1007\/BF01973316"},{"key":"e_1_2_1_15_1","unstructured":"Domowitz I.andC. S. 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