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Asymmetric Dependence in International Currency Markets

Paltalidis, N.; Patsika, V

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Authors

V Patsika



Abstract

We find new channels for the transmission of shocks in international currencies, by developing a model in which shock propagations evolve from domestic stock markets, liquidity, credit risk and growth channels. We employ symmetric and asymmetric copulas to quantify joint downside risks and document that asset classes tend to experience concurrent extreme shocks. The time-varying spillover intensities cause a significant increase in cross-asset linkages during periods of high volatility, which is over and above any expected economic fundamentals, providing strong evidence of asymmetric investor induced contagion. The critical role of the credit crisis is amplified, as the beginning of an important reassessment of emerging currencies which lead to changes in the dependence structure, a revaluation and recalibration of their risk characteristics. By modelling tail risks, we also find patterns consistent with the domino effect.

Citation

Paltalidis, N., & Patsika, V. (2012). Asymmetric Dependence in International Currency Markets. European Journal of Finance, 26(10), 994-1017. https://doi.org/10.1080/1351847x.2019.1650089

Journal Article Type Article
Acceptance Date Jul 10, 2019
Online Publication Date Aug 6, 2019
Publication Date 2012
Deposit Date Jul 11, 2019
Publicly Available Date Mar 28, 2024
Journal European Journal of Finance
Print ISSN 1351-847X
Electronic ISSN 1466-4364
Publisher Taylor and Francis Group
Peer Reviewed Peer Reviewed
Volume 26
Issue 10
Pages 994-1017
DOI https://doi.org/10.1080/1351847x.2019.1650089
Public URL https://durham-repository.worktribe.com/output/1292690

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