The article by Andrew J. Patton investigates the asymmetric dependence between the Deutsche mark (DM) and Japanese yen (Yen) exchange rates against the U.S. dollar. The study extends the theory of copulas to allow for conditioning variables, using this extension to model the conditional dependence structure of these exchange rates. The findings suggest that the DM-Yen and DM-Yen exchange rates exhibit more correlation when they are depreciating against the dollar compared to when they are appreciating. The analysis also reveals a significant structural break in the conditional copula following the introduction of the euro in January 1999, with a substantial drop in the level of dependence and changes in the dynamics of conditional dependence. The study employs maximum likelihood estimation and goodness-of-fit tests to validate the models, demonstrating the importance of correctly specifying marginal distributions and copula models. The results highlight the asymmetric nature of exchange rate dependence, which may be influenced by central bank behavior and currency portfolio rebalancing.The article by Andrew J. Patton investigates the asymmetric dependence between the Deutsche mark (DM) and Japanese yen (Yen) exchange rates against the U.S. dollar. The study extends the theory of copulas to allow for conditioning variables, using this extension to model the conditional dependence structure of these exchange rates. The findings suggest that the DM-Yen and DM-Yen exchange rates exhibit more correlation when they are depreciating against the dollar compared to when they are appreciating. The analysis also reveals a significant structural break in the conditional copula following the introduction of the euro in January 1999, with a substantial drop in the level of dependence and changes in the dynamics of conditional dependence. The study employs maximum likelihood estimation and goodness-of-fit tests to validate the models, demonstrating the importance of correctly specifying marginal distributions and copula models. The results highlight the asymmetric nature of exchange rate dependence, which may be influenced by central bank behavior and currency portfolio rebalancing.