Large asymmetry and directional dependence by using copula modeling to currency exchange rates

Document Type

Conference Proceeding

Publication Title

Model Assisted Statistics and Applications

Abstract

To examine the asymmetry of financial data in detail, we have considered both the tail dependence with diverse copulas and Jung et al.'s [8] directional dependence by copula. From the empirical study in this paper, we have found that the tail dependence by Patton's [11] modified symmetrized Joe-Clayton copula function did not show the asymmetry property sufficiently because there is no tail dependence for the currency exchange rates of Republic of Korea and Japan against the US dollar after the 2008 financial crisis. However, by using the copula approach for directional dependence, we showed that there exists the asymmetry of the currency exchange rates of Republic of Korea and Japan against the US dollar before and after the 2008 financial crisis because the directional dependence only when existing an asymmetry of data can be found. We conclude that the copula approach for directional dependence can be supplemented to explain the asymmetry property in addition to the tail dependence approach. © 2012 - IOS Press and the authors. All rights reserved.

First Page

327

Last Page

340

DOI

10.3233/MAS-2012-00244

Publication Date

11-16-2012

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