Abstract
This paper investigates the comovement and tail dependence between Chinese Yuan and New Taiwan Dollar non-delivery forward (NDF) rates against the U.S. dollar. We adopt the copula modeling approach to capture dynamics of correlation and tail dependence between two NDF rates. It is shown that the interdependence between two NDF rates strengthens as time elapses. In particular, the degree of correlation surges sharply after April 9, 2008 while the degree of tail dependence increases significantly after February 10, 2009. Each time point of change is shown to be close to economic and political events that are supposed to have a large impact on the relationship between Chinese Yuan and New Taiwan Dollar.
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