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Modeling and Prediction of Exchange Rate and Billion Gold Price of Thailand

P. Amphanthong, P. Busababodhin

Abstract


The aim of this article is to investigate a correlation of the dependence structure between the THB/USD exchange rate and the golden price of Thailand, using extreme value copula by combining the Bivariate Extreme Value theorem and copula.The selection and estimation of the copula extreme value theory is based on the Maximum Likelihood Estimation (MLE) method, and a behavior of dependence was determined by the dependence function. The procedure is suggested for the measurement of the copula function to recover the joint tailed distribution by comparingfive parametric models of extreme value copulas. The results of this analysis denote that the Aneglog and Asy.log copulas analysis are the most appropriate method to best fit extreme value copula for BGEV and BGPD, respectively, because the Akaike Information Criterion (AIC) of this method is the lowest when compared with the other copulas. Furthermore, Value at Risk (VaR) is applied to calibrate the probability of the joint tail that may occur in block maxima and over the threshold. The Neglog and Aneglogcopula are found to stand the maximum risk of block maxima and exceeding the threshold. These results could be beneficial for business and policy makers to predict the possibility of extreme economical fluctuation in the future.

Keywords


Bivariate extreme value theorem; extreme value copulas; dependence function;value at risk.

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