DCC Analysis of Two Exchange Rate Market Returns Volatility with a Factor of Switzerland Exchange Rate Market: Study of Japan and Korea Markets

This paper uses the Japan´s and the Korea´s exchange rates with a factor of Switzerland´s exchange rate market, discussing the model construction and their associations of between Japan´s and Korea´s exchange rate markets. The empirical results show that the mutual affects of the Japan´s and Korea´s exchange rate markets may construct in bivariate IGARCH (1, 1) model with a DCC. The empirical result also shows that between Korea´s and Japan´s exchange rate market returns exists the positive relations- namely two exchange rate market´s volatility are synchronized influence. Empirical result shows that the Japan´s exchange rate´s volatility will also affect the variation risk of the Korea´s exchange rate market, and the Korea´s exchange rate´s volatility will also affect the variation risk of the Japan´s exchange rate market. Also, Korea´s and Japan´s exchange rate markets do not have the asymmetrical effect in the research data period. And the Switzerland´s exchange rate´s volatility will also affect the variation risk of the Japan´s and the Korea´s exchange rate markets.