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Title: Testing for structural changes in exchange rates' dependence beyond linear correlation
Authors: Dias, Alexandra
Embrechts, P.
First Published: 6-Nov-2007
Publisher: Routledge Journals, Taylor & Francis Ltd
Citation: European Journal Of Finance, 2009, 15 (7-8), pp. 619-637
Abstract: In 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.
DOI Link: 10.1080/13518470701705579
ISSN: 1351-847X
eISSN: 1466-4364
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2007, Taylor and Francis. The file associated with this record is distributed under the Creative Commons “Attribution Non-Commercial No Derivatives” licence, further details of which can be found via the following link:
Appears in Collections:Published Articles, School of Management

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