Truncation invariant copulas for modeling directional dependence: Application to foreign currency exchange data

Jong-Min Kim, Yoon Sung Jung, Engin A. Sungur

    Research output: Contribution to journalArticlepeer-review

    4 Scopus citations

    Abstract

    Directional dependence modeling has been applied to many research areas including economics, finance, biostatistics, and bioinformatics. The concept of directional dependence using copula regression functions has been introduced by Sungur [21]. So we propose a new copula family which incorporates the truncation invariant structure [20] into the generalized Farlie-Gumbel-Morgenstern (FGM) distributions. The directional dependence of the new truncated invariant FGM copulas will be also introduced in this research. We will show that there exists a directional dependence in our truncation invariant FGM copulas using Foreign Currency Exchange Data of the Canadian Dollar (CAD/USD), the Japanese Yen (JPY/USD), and the Korean Won (KRW/USD).

    Original languageEnglish (US)
    Pages (from-to)309-324
    Number of pages16
    JournalModel Assisted Statistics and Applications
    Volume9
    Issue number4
    DOIs
    StatePublished - 2014

    Keywords

    • Copula
    • directional dependence
    • generalized FGM distribution
    • regression function

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