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The dependency measures of commercial bank risks: Using an optimal copula selection method based on non-parametric kernel density

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  • Jin, Chenglu
  • Chen, Rongda
  • Cheng, Diandian
  • Mo, Sitian
  • Yang, Ke

Abstract

This paper focuses on constructing a theoretical overview of using optimal Copula selection method based on non-parametric kernel density for the dependency between each pair of the three main risks: credit risk, market risk and operational risk. Empirically, by using data of 12 listed commercial banks in China, a significant tail dependency between credit risk and market risk is found, while those between operational risk and credit risk or market risk are not obvious. Our finding highlights the importance of investigating operational risks separately in an Internet financial environment.

Suggested Citation

  • Jin, Chenglu & Chen, Rongda & Cheng, Diandian & Mo, Sitian & Yang, Ke, 2020. "The dependency measures of commercial bank risks: Using an optimal copula selection method based on non-parametric kernel density," Finance Research Letters, Elsevier, vol. 37(C).
    • Handle: RePEc:eee:finlet:v:37:y:2020:i:c:s1544612320305365
    DOI: 10.1016/j.frl.2020.101706
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    References listed on IDEAS

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    Cited by:

    1. Martin Eling & Kwangmin Jung, 2022. "Heterogeneity in cyber loss severity and its impact on cyber risk measurement," Risk Management, Palgrave Macmillan, vol. 24(4), pages 273-297, December.

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