Truncation invariant copulas for modeling directional dependence: Application to foreign currency exchange data

Jong Min Kim, Yoon Sung Jung, Engin A. Sungur

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    Directional dependence modeling has been applied to many research areas including economics, finance, biostatistics, and bioinformatics. The concept of directional dependence using copula regression functions has been introduced by Sungur [21]. So we propose a new copula family which incorporates the truncation invariant structure [20] into the generalized Farlie-Gumbel-Morgenstern (FGM) distributions. The directional dependence of the new truncated invariant FGM copulas will be also introduced in this research. We will show that there exists a directional dependence in our truncation invariant FGM copulas using Foreign Currency Exchange Data of the Canadian Dollar (CAD/USD), the Japanese Yen (JPY/USD), and the Korean Won (KRW/USD).

    Original languageEnglish (US)
    Pages (from-to)309-324
    Number of pages16
    JournalModel Assisted Statistics and Applications
    Issue number4
    StatePublished - 2014

    Bibliographical note

    Publisher Copyright:
    © 2014 Taylor & Francis.


    • Copula
    • directional dependence
    • generalized FGM distribution
    • regression function

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