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Modeling Currency Exchange Data with Asymmetric Copula Functions

In: Advances in Econometrics, Operational Research, Data Science and Actuarial Studies

Author

Listed:
  • Emel Kızılok Kara

    (Kırıkkale University)

  • Sibel Açık Kemaloğlu

    (Ankara University)

  • Ömer Ozan Evkaya

    (Universita Di Padova)

Abstract

In the fields of economics and finance, there are data sets with dependent structures that can be modeled symmetrically or asymmetrically. Analyzing the asymmetrically dependent data with a symmetric model can result in inaccurate financial decisions. Besides, the effect of any event such as the financial crisis on international financial returns can be captured more accurately with asymmetric models. Recent studies have revealed that asymmetric dependent structures can be observed in exchange rates. While dependency structures for a financial data set can be modeled with copula functions efficiently, asymmetric dependencies can be modeled with directional copula functions. In the literature, there are some asymmetric copula models constructed in different ways to model directional dependence. The aim of this study is to model asymmetric exchange rate data with directional dependency measures. For this reason, the dependence among the four currencies traded in US Dollars is investigated using Khoudraji type copula functions. Additionally, the proportions of the total variability between foreign exchange returns are examined in detail.

Suggested Citation

  • Emel Kızılok Kara & Sibel Açık Kemaloğlu & Ömer Ozan Evkaya, 2022. "Modeling Currency Exchange Data with Asymmetric Copula Functions," Contributions to Economics, in: M. Kenan Terzioğlu (ed.), Advances in Econometrics, Operational Research, Data Science and Actuarial Studies, pages 49-62, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-85254-2_4
    DOI: 10.1007/978-3-030-85254-2_4
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