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Modeling the joint dynamic value at risk of the volatility index, oil price, and exchange rate

Wei Peng, Shichao Hu, Wang Chen (), Yu-feng Zeng and Lu Yang ()

International Review of Economics & Finance, 2019, vol. 59, issue C, 137-149

Abstract: In this study, we investigate how the volatility index (VIX) and oil price influence the foreign exchange rate based on a conditional autoregressive value at risk model. We find that the oil price affects the value at risk (VaR) of exchange rates of oil-importing and oil-exporting countries differently. Further, the VIX as a volatility measure can only influence the tail risk of these currencies when the US financial market fluctuates significantly. In addition, we find that there is a significant increase in the volatility of the VaR of these currencies after the financial crisis. Our empirical results would provide useful information for investors.

Keywords: Conditional autoregressive value at risk; Value at risk; Volatility index; Oil price; Exchange rate (search for similar items in EconPapers)
JEL-codes: C13 C14 C32 G10 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.iref.2018.08.014

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Handle: RePEc:eee:reveco:v:59:y:2019:i:c:p:137-149