Resumen de Evaluating Currency Risk in Emerging Markets

S. Y. Novak, V. Dalla, L. Giraitis

• We present a systematic approach to the problem of evaluating currency risk. The approach involves a test for stationarity, and a method of estimating Value-at-Risk (VaR) and Expected Shortfall (ES) from dependent heavy-tailed data. Various estimation methods are compared and the accuracy of the approach is discussed. An application of the technique to the Mexican peso/US dollar exchange rate reveals the level of currency risk foreign investors face in Mexico.