In this paper we construct a dynamic conditional correlation (DCC) and a trivariate IGARCH (1, 1) model to evaluate the associations of the Taiwan, the Korea and the Thailand exchange rate markets with a factor of Japanese exchange rate market. The empirical result shows that Korea’s exchange rate market positively affect the Taiwan and Thailand exchange rate markets, and the volatility of the three exchange rate markets interact with one another. The variation risk of the Japan’s exchange rate markets’ volatility affects the variation risks of Taiwan, Korea and Thailand exchange rate markets. Therefore, based on the viewpoint of DCC, the explanatory ability of the trivariate IGARCH(1, 1) model is better than the traditional model of the trivariate GARCH. The evidence suggests that exchange rate market investors or international fund managers must evaluate the variation risk and relationships of the exchange rate markets’ volatility.
