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A copula-based approach to financial contagion in the foreign exchange markets

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  • Selma Jayech
  • Naceur Ben Zina

Abstract

In this paper, we try to find out if the foreign exchange markets of developed countries reflect the effects of financial contagion of the 2007 subprime financial crisis and the intensity of contagion differs across countries. In fact, we have defined contagion as the significant increase in co-movement of foreign exchange markets during the crisis period for reasons that are not explained by fundamentals. This paper investigates the dependence structure between the following three foreign exchange currencies (the British pound, the French franc and the German mark) by using copulas. Our results suggest that the current crisis does not affect the exchange markets of these three developed countries.

Suggested Citation

  • Selma Jayech & Naceur Ben Zina, 2011. "A copula-based approach to financial contagion in the foreign exchange markets," International Journal of Mathematics in Operational Research, Inderscience Enterprises Ltd, vol. 3(6), pages 636-657.
    • Handle: RePEc:ids:ijmore:v:3:y:2011:i:6:p:636-657
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    Citations

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    Cited by:

    1. Wuyi Ye & Kebing Luo & Shaofu Du, 2014. "Measuring Contagion of Subprime Crisis Based on MVMQ-CAViaR Method," Discrete Dynamics in Nature and Society, Hindawi, vol. 2014, pages 1-12, June.
    2. Ye, Wuyi & Liu, Xiaoquan & Miao, Baiqi, 2012. "Measuring the subprime crisis contagion: Evidence of change point analysis of copula functions," European Journal of Operational Research, Elsevier, vol. 222(1), pages 96-103.

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