Tail behaviour of the Euro

John Cotter

Centre for Financial Markets Working Papers from Research Repository, University College Dublin

Abstract: This paper empirically analyses risk in the Euro relative to other currencies. Comparisons are made between a sub period encompassing the final transitional stage to full monetary union with a sub period prior to this. Stability in the face of speculative attack is examined using Extreme Value Theory to obtain estimates of tail exchange rate changes. The findings are encouraging. The Euro’s common risk measures do not deviate substantially from other currencies. Also, the Euro is stable in the face of speculative pressure. For example, the findings consistently show the Euro being less risky than the Yen, and having similar inherent risk to the Deutsche Mark, the currency that it is essentially replacing.

Keywords: Extreme Value Theory; The Euro; GARCH; Tail Behaviour; Euro; Extreme value theory; International finance--Econometric models; Foreign Exchange--Econometric models (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2004
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http://hdl.handle.net/10197/1140 First version, 2004 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:rru:cfmwps:10197/1140

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