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A Copula Approach to Modeling Extreme Values of Exchange Rates

Johansson, Annika (2014) In Master's Theses in Mathematical Sciences FMS820 20141
Mathematical Statistics
Abstract (Swedish)
In this thesis we consider a general approach to modeling dependence in extreme values
of exchange rates by using copulas. As specific examples the following pairs of currencies
are analyzed: Swedish krona to U.S. dollar (SEK/USD), Swedish krona to Euro
(SEK/EUR), Swedish krona to British pound (SEK/GBP), Swedish krona to Japanese Yen
(SEK/JPY), Swedish krona to Danish krone (SEK/DKK) and Swedish krona to Norwegian
krone (SEK/NOK). The daily log-return series are first modeled individually using
ARMA-GARCH models. In some cases, when it is statistically significant, we also use three
month Stockholm Interbank Offered Rate (STIBOR) as a covariate in our models. After
the models have been fitted to the datasets the residuals are... (More)
In this thesis we consider a general approach to modeling dependence in extreme values
of exchange rates by using copulas. As specific examples the following pairs of currencies
are analyzed: Swedish krona to U.S. dollar (SEK/USD), Swedish krona to Euro
(SEK/EUR), Swedish krona to British pound (SEK/GBP), Swedish krona to Japanese Yen
(SEK/JPY), Swedish krona to Danish krone (SEK/DKK) and Swedish krona to Norwegian
krone (SEK/NOK). The daily log-return series are first modeled individually using
ARMA-GARCH models. In some cases, when it is statistically significant, we also use three
month Stockholm Interbank Offered Rate (STIBOR) as a covariate in our models. After
the models have been fitted to the datasets the residuals are considered for further analysis.
We fit several bivariate copula models to the residual series and use different measures of
goodness-of fit to choose one between competing models. We demonstrate the flexibility of
the approach by repeating our analysis both for the original residuals as well as the monthly
and quarterly extreme values of the series.
Keywords. GARCH, EGARCH, copula, extreme values, exchange rates, modelling (Less)
Please use this url to cite or link to this publication:
author
Johansson, Annika
supervisor
organization
course
FMS820 20141
year
type
H2 - Master's Degree (Two Years)
subject
publication/series
Master's Theses in Mathematical Sciences
report number
LUTFMS-3241-2014
ISSN
1404-6342
other publication id
2014:E10
language
English
id
4462918
date added to LUP
2014-06-11 07:55:01
date last changed
2024-10-14 14:01:02
@misc{4462918,
  abstract     = {{In this thesis we consider a general approach to modeling dependence in extreme values
of exchange rates by using copulas. As specific examples the following pairs of currencies
are analyzed: Swedish krona to U.S. dollar (SEK/USD), Swedish krona to Euro
(SEK/EUR), Swedish krona to British pound (SEK/GBP), Swedish krona to Japanese Yen
(SEK/JPY), Swedish krona to Danish krone (SEK/DKK) and Swedish krona to Norwegian
krone (SEK/NOK). The daily log-return series are first modeled individually using
ARMA-GARCH models. In some cases, when it is statistically significant, we also use three
month Stockholm Interbank Offered Rate (STIBOR) as a covariate in our models. After
the models have been fitted to the datasets the residuals are considered for further analysis.
We fit several bivariate copula models to the residual series and use different measures of
goodness-of fit to choose one between competing models. We demonstrate the flexibility of
the approach by repeating our analysis both for the original residuals as well as the monthly
and quarterly extreme values of the series.
Keywords. GARCH, EGARCH, copula, extreme values, exchange rates, modelling}},
  author       = {{Johansson, Annika}},
  issn         = {{1404-6342}},
  language     = {{eng}},
  note         = {{Student Paper}},
  series       = {{Master's Theses in Mathematical Sciences}},
  title        = {{A Copula Approach to Modeling Extreme Values of Exchange Rates}},
  year         = {{2014}},
}