Risk Estimation in Exchange Rate Markets Based on Stochastic Copula Approach

Risk estimation is of great importance in financial risk management. In this study, the exchange rate portfolio performed via stochastic copula approach. This model-based latent process has a parameter that changes over time and thus can model dependency structure between variables comprehensive dynamic way. First, marginals returns are handled with ARMA-GARCH-type models. Then, modeled Finally, estimates carried out at 95% 99% confidence level for foreign portfolios. It found proposed based on approach outperforms both classical methods static