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An order of asymmetry in copulas, and implications for risk management

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  • Siburg, Karl Friedrich
  • Stehling, Katharina
  • Stoimenov, Pavel A.
  • Weiß, Gregor N.F.

Abstract

We study symmetry properties of bivariate copulas. For this, we introduce an order of asymmetry, as well as measures of asymmetry which are monotone in that order. In an empirical study, we illustrate that asymmetric dependence structures do indeed occur in financial market data and discuss its relevance for financial risk management.

Suggested Citation

  • Siburg, Karl Friedrich & Stehling, Katharina & Stoimenov, Pavel A. & Weiß, Gregor N.F., 2016. "An order of asymmetry in copulas, and implications for risk management," Insurance: Mathematics and Economics, Elsevier, vol. 68(C), pages 241-247.
  • Handle: RePEc:eee:insuma:v:68:y:2016:i:c:p:241-247
    DOI: 10.1016/j.insmatheco.2016.03.008
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    References listed on IDEAS

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    1. Peter Christoffersen & Vihang Errunza & Kris Jacobs & Hugues Langlois, 2012. "Is the Potential for International Diversification Disappearing? A Dynamic Copula Approach," Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3711-3751.
    2. Dong Hwan Oh & Andrew J. Patton, 2013. "Time-Varying Systemic Risk: Evidence from a Dynamic Copula Model of CDS Spreads," Working Papers 13-30, Duke University, Department of Economics.
    3. Wu, Shaomin, 2014. "Construction of asymmetric copulas and its application in two-dimensional reliability modelling," European Journal of Operational Research, Elsevier, vol. 238(2), pages 476-485.
    4. Christian Genest & Johanna Nešlehová & Jean-François Quessy, 2012. "Tests of symmetry for bivariate copulas," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 64(4), pages 811-834, August.
    5. Ozgur S. Ince & R. Burt Porter, 2006. "INDIVIDUAL EQUITY RETURN DATA FROM THOMSON DATASTREAM: HANDLE WITH CARE!," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(4), pages 463-479.
    6. Roger Nelsen, 2007. "Extremes of nonexchangeability," Statistical Papers, Springer, vol. 48(4), pages 695-695, October.
    7. McNeil, Alexander J. & Neslehová, Johanna, 2010. "From Archimedean to Liouville copulas," Journal of Multivariate Analysis, Elsevier, vol. 101(8), pages 1772-1790, September.
    8. Ivan Kojadinovic & Jun Yan, 2012. "A Non-parametric Test of Exchangeability for Extreme-Value and Left-Tail Decreasing Bivariate Copulas," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 39(3), pages 480-496, September.
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    More about this item

    Keywords

    Asymmetry; Exchangeability; Copula; Diversification; Dependence modeling;

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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