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Tail Behaviour of the Euro

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  • John Cotter

Abstract

This paper empirically analyses risk in the Euro relative to other currencies. Comparisons are made between a sub period encompassing the final transitional stage to full monetary union with a sub period prior to this. Stability in the face of speculative attack is examined using Extreme Value Theory to obtain estimates of tail exchange rate changes. The findings are encouraging. The Euro's common risk measures do not deviate substantially from other currencies. Also, the Euro is stable in the face of speculative pressure. For example, the findings consistently show the Euro being less risky than the Yen, and having similar inherent risk to the Deutsche Mark, the currency that it is essentially replacing.

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  • John Cotter, 2011. "Tail Behaviour of the Euro," Papers 1103.5418, arXiv.org.
    • Handle: RePEc:arx:papers:1103.5418
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    Cited by:

    1. Cotter, John & Dowd, Kevin, 2007. "The tail risks of FX return distributions: A comparison of the returns associated with limit orders and market orders," Finance Research Letters, Elsevier, vol. 4(3), pages 146-154, September.
    2. Cotter, John & Dowd, Kevin, 2010. "Intra-day seasonality in foreign exchange market transactions," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 287-294, April.
    3. Ana-Maria Gavril, 2009. "Exchange Rate Risk: Heads or Tails," Advances in Economic and Financial Research - DOFIN Working Paper Series 35, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
    4. Jesus Garcia-Iglesias, 2007. "How the European Central Bank decided its early monetary policy?," Applied Economics, Taylor & Francis Journals, vol. 39(7), pages 927-936.
    5. Wan, Jer-Yuh & Kao, Chung-Wei, 2008. "The euro and pound volatility dynamics: An investigation from conditional jump process," Research in International Business and Finance, Elsevier, vol. 22(2), pages 193-207, June.
    6. John Cotter, 2006. "Extreme Value Estimation of Boom and Crash Statistics," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 553-566.
    7. Cotter, John, 2006. "Modelling catastrophic risk in international equity markets: An extreme value approach," MPRA Paper 3507, University Library of Munich, Germany.
    8. John Cotter, 2005. "Extreme risk in futures contracts," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 489-492.
    9. Vladimir Petrov & Anton Golub & Richard Olsen, 2019. "Instantaneous Volatility Seasonality of High-Frequency Markets in Directional-Change Intrinsic Time," JRFM, MDPI, vol. 12(2), pages 1-31, April.
    10. de Jesús, Raúl & Ortiz, Edgar & Cabello, Alejandra, 2013. "Long run peso/dollar exchange rates and extreme value behavior: Value at Risk modeling," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 139-152.
    11. Cotter, John, 2004. "Modelling extreme financial returns of global equity markets," MPRA Paper 3532, University Library of Munich, Germany.

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    • F31 - International Economics - - International Finance - - - Foreign Exchange

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