Title page for ETD etd-11172006-091911


Type of Document Master's Thesis
Author Coelho, Ryan
Author's Email Address ryancoelho@yahoo.com
URN etd-11172006-091911
Title Characterization of the Dependency across Foreign Exchange Markets Using Copulas
Degree Master of Science (M.S.)
Department Mathematics
Advisory Committee
Advisor Name Title
Ambar N. Sengupta Committee Chair
Jimmy E. Hilliard Committee Member
Webb George Cochran Committee Member
Keywords
  • foreign exchange
  • bivariate
  • invariance
  • comovement
Date of Defense 2006-11-03
Availability unrestricted
Abstract
Though Pearson's correlation coefficient provides a convenient approach to measuring the dependency between two variables, in the last few years, there has been a significant amount of literature cautioning against the use of Pearson's correlation coefficient, as it does not remain invariant under monotone transformations of the underlying distribution functions. Since we are interested in examining the dependency pattern observed by the return on the Sterling Pound with that of the Japanese Yen, we will use the notion of a copula to approximate the joint density function between the daily returns on the Sterling Pound and the Japanese Yen. In particular, we use a result that is fundamental to the development of copula theory, namely Sklar's Theorem, to examine the observed joint density function between the daily returns on the Sterling Pound and the Japanese Yen. We will attempt to capture the approximated joint density function using a theoretical Gaussian Copula Model. This comparison is performed in the case where the underlying marginal distributions are both uniform, as well as the case where the underlying marginal distributions are both gaussian.
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