TY - JOUR
T1 - Large asymmetry and directional dependence by using copula modeling to currency exchange rates
AU - Uhm, Daiho
AU - Kim, Jong Min
AU - Jung, Yoon Sung
PY - 2012/11/16
Y1 - 2012/11/16
N2 - 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.
AB - 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.
KW - Farlie-Gumbel-Morgenstern copula\vspace{0.2cm}
KW - Time copula
KW - currency exchange rate
KW - directional dependence
KW - tail dependence
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U2 - 10.3233/MAS-2012-00244
DO - 10.3233/MAS-2012-00244
M3 - Article
AN - SCOPUS:84868705226
VL - 7
SP - 327
EP - 340
JO - Model Assisted Statistics and Applications
JF - Model Assisted Statistics and Applications
SN - 1574-1699
IS - 4
ER -