Dias_PE_testing_x_rates.pdf (216.29 kB)
Testing for structural changes in exchange rates' dependence beyond linear correlation
journal contribution
posted on 2012-10-24, 08:54 authored by Alexandra Dias, P. EmbrechtsIn this paper, we test for structural changes in the conditional dependence of two-dimensional foreign exchange data. We show that by modeling the conditional dependence structure using copulae, we can detect changes in the dependence beyond linear correlation, such as changes in the tail of the joint distribution. This methodology is relevant for estimating risk-management measures, such as portfolio value-at-risk, pricing multi-name financial instruments, and portfolio asset allocation. Our results include evidence of the existence of changes in the correlation as well as in the fatness of the tail of the dependence between Deutsche mark and Japanese yen.
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Citation
European Journal Of Finance, 2009, 15 (7-8), pp. 619-637Version
- AM (Accepted Manuscript)
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European Journal Of FinancePublisher
Routledge Journals, Taylor & Francis Ltdissn
1351-847Xeissn
1466-4364Copyright date
2007Available date
2012-10-24Publisher DOI
Publisher version
http://www.tandfonline.com/doi/abs/10.1080/13518470701705579Language
enAdministrator link
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