Advanced Search
MyIDEAS: Login

Conditional Dependency of Financial Series: The Copula-GARCH Model

Contents:

Author Info

  • Eric Jondeau

    (Banque de France, DEER)

  • Michael Rockinger

    (HEC-University of Lausanne)

Abstract

We develop a new methodology to measure conditional dependency between time series each driven by complicated marginal distributions. We achieve this by using copula functions that link marginal distributions, and by expressing the parameter of the copula as a function of predetermined variables. The marginal model is an autoregressive version of Hansen’s (1994) GARCH-type model with time-varying skewness and kurtosis. Here, we extend, to a dynamic setting, the research that fo-cuses on asymmetries in correlation during extreme events. We show that, for many market indices, dependency increases subsequent to large extreme realizations. Furthermore, for several index pairs, this increase is stronger after crashes. Our model has many potential applications such as VaR measurement and portfolio allocation in non-gaussian environments.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.swissfinanceinstitute.ch/rp69.pdf
Download Restriction: no

Bibliographic Info

Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp69.

as in new window
Length:
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:fam:rpseri:rp69

Contact details of provider:
Postal: 40 bd. du Pont d'Arve, Case postale 3, CH - 1211 Geneva 4
Phone: 41 22 / 312 09 61
Fax: 41 22 / 312 10 26
Web page: http://www.swissfinanceinstitute.ch
More information through EDIRC

Related research

Keywords: International correlation; Stock indices; Skewed Student-t distribution;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Cyril Caillault & Dominique Guegan, 2009. "Forecasting VaR and Expected Shortfall using Dynamical Systems: A Risk Management Strategy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00375765, HAL.
  2. Dominique Guegan & Jing Zhang, 2009. "Pricing bivariate option under GARCH-GH model with dynamic copula: application for Chinese market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00368336, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fam:rpseri:rp69. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.