Currency Tail Risk Measurement and Spillovers: An Improved TENET approach

Based on an improved TENET approach, this paper analyses the tail risk of 32 major global currencies and measures the tail risk spillover among these currencies using daily data. We find that (i) The tail risk of USD, EUR, GBP and JPY is relatively high, while CNY shows low risk with a continuous upward trend; (ii) The total tail risk connectedness of currencies declines over time, but spikes during significant events in recent years; (iii) The tail risk spillover of currencies from developed economies is higher than developing economies. Moreover, European and North American currencies primarily exhibit tail risk spillover, while Asian and African (South African) currencies mainly absorb risk from other regions.