Extreme co-movements and dependencies among major international exchange rates

Claudiu Albulescu (), Christian Aubin (), Daniel Goyeau () and Aviral Tiwari
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Christian Aubin: Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers, CPER INSECT - CPER "INnovation Sociale, Economique et Culturelle dans des Territoires en mutation" (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers [UAR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique
Daniel Goyeau: Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers

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Abstract: This paper investigates the bivariate dependence structure between four international exchange rates (EUR, GBP, CAD, JPY), against the US Dollar, using daily data for the time-span 1999-2014. We use different time-invariant and time-varying copula functions, with different forms of tail dependence, and discover a positive dependence between all exchange rates, although the dependence is less strong for the JPY-pairs of exchange rates. Furthermore, we find evidence of symmetric tail dependence. Finally, the dependence is time-varying and intensifies after the onset of the recent global financial crisis, with the exception of the JPY-pairs. These findings provide additional insight for international investors, risk managers and for policy makers, given the fact that the tail dependence is either positive or negative, is time-changing, and have different structures.

Keywords: tail dependence; copulas; exchange rate; dependence structure; Portfolio optimization; non - parametric plots (search for similar items in EconPapers)
Date: 2018-03-12
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Citations: View citations in EconPapers (13)

Published in Quarterly Review of Economics and Finance, 2018, 69, pp.56-69. ⟨10.1016/j.qref.2018.03.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01394675

DOI: 10.1016/j.qref.2018.03.007

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