Value at Risk and Dependency over time for Exchange Rates with Time-Varying Copulas

We use constant and time-varying copulas, both Normal and Symmetrized Joe-Clayton copulas, to describe the dependency of exchange rates. We test wether copulas describe the exchange rates better than more conventional models as the AR(p)-GARCH(P,Q) and test whether there is a difference between the stability of the copula parameters between emerging markets and advanced markets versus the Euro. We find evidence that the copula models estimate a better VaR than the conventional model, but no evidence that there is a difference in stability of the parameters for the different type of markets.