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Modeling International Financial Returns with a Multivariate Regime Switching Copula
Company: CORE, University of Louvain
Company Url: Click here to open
Year Of Publication: 2008
Month Of Publication: March
Resource Link: Click here to open
Pages: 46
Download Count: 0
View Count: 1129
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 2-6-2013
Publisher: Administrator
Summary
In order to capture observed asymmetric dependence in international financial returns, we construct a multivariate regime-switching model of copulas. We model dependence
with one Gaussian and one canonical vine copula regime. Canonical vines are constructed from bivariate conditional copulas and provide a very flexible way of characterizing dependence in multivariate settings. We apply the model to returns from the G5 and Latin American regions, and document two main findings. First, we discover that models with canonical vines generally dominate alternative dependence structures. Second, the choice of copula is important for risk management, because it modifies the Value at Risk (VaR) of international portfolio returns.
This document may be downloaded without charge from MPRA by clicking the 'Buy from Publisher' button. (accessed 2013-02-06)
This document is published in Journal of Financial Econometrics (volume 7, number 4) 2009, 437-480.
http://dx.doi.org/10.1093/jjfinec/nbp014
Author(s)
Chollete, Loran Sign in to follow this author
Heinen, Andreas Sign in to follow this author
Valdesogo, Alfonso Sign in to follow this author
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