Exchange Rate Dependence Based On Copula Function And Its Impact On Stock Market

With the acceleration of globalization,the increasing complexity of financial market risk,the continuous improvement of market efficiency,and the continuing turbulence of financial capital,the traditional hypothesis-based analysis method is no longer applicable to the financial market with complex changes.This paper combines the Copula theory to analyze the correlation between foreign exchange market.Firstly,we study the marginal distribution of variables by kernel density estimation,and then construct the mixed Copula model.Then we construct the mixed Copula model,and then use the Copula function to analyze the correlation between the foreign exchange market.EM algorithm is applied to the parameter estimation of hybrid Copula,and the correlation between exchange rate is analyzed,and then the influence of exchange rate dependence on stock market is discussed.Because financial markets and stock relationships are not a particular form of change.Exchange rate,Hong Kong pegged to the dollar is relatively large,so this article selected July 22,2014 to August 26,2015 US dollar exchange rate and Hong Kong dollars tail tailored research,and then study the stock market.The GARCH model is used to describe the spillover effect and dynamic relationship between the foreign exchange market and the stock market respectively under the background of exchange rate dependency.Finally,for the stock market,The results of dynamic risk assessment under different confidence levels are given.This paper continues to summarize the copula theory in the application of foreign exchange market correlation analysis,as well as the dynamic correlation coefficient between markets,the dynamic risk of the stock market and so on,and put forward the problems and research prospects to be further studied.