The key objective of the study is to explore the application of GARCH type models, like GARCH; EGARCH; TARCH; and PARCH; when applied to task for modelling the BDT/USD exchange rate using the daily foreign exchange rate series fixed up by Bangladesh Bank. This study is conducted by benchmarking their results with AR and ARMA models.The BDT/USD time series from July 03, 2006 to April 30, 2012 are used for the study purpose out of which in-sample and out-of-sample date set cover from July 03, 2006 to May 13, 2010 and May 14, 2010 to April 30, 2012 respectively.The major finding of this study is that all GARCH type models demonstrate that past volatility of exchange rate significantly influence current volatility. Both the AR and ARMA models are found as the best model as per in-sample statistical performance results, whereas according to out-of-sample, GARCH model is the best model with transaction costs. Moreover, Both the ARMA and AR models are nominated as the best model as per in-sample statistical performance results, whereas according to out-of-sample, the TARCH model is nominated as the best model without transaction costs. The EGARCH and TARCH models outperform all the other models as per to in-sample and out-of-sample trading performance outcomes respectively including transaction costs.