ABSTRACT
Financial markets are very sensitive to all kinds of risk. Immediately after any unexpected announcement the volatility of market returns is suddenly increased and market prices can potentially fall down. However, the announcement can influence prices of only some assets, while prices of others remain stable. The reason is that various assets are sensitive to distinct kinds of risk in a different way. It also follows that a different risk type indicates a need for distinct methods of risk modelling, measuring and managing. The purpose of this chapter is to identify – on the basis of a risk model performance, including backtesting procedure – if there is any similarity among particular European currencies or, to be more exact, their exchange rates with respect to euro, and especially whether integration of new economies, such as the Czech Republic, Hungary or Poland, implies some similarities in risk estimation failures or if they still behave differently.
