A time-varying multivariate noncentral contaminated normal copula model and its application to the visualized dependence analysis of Hong Kong stock markets

DOI10.1155/2020/9673623MaRDI QIDQ2213441zbMATH OpenOpenAlexFDO

Authors Zhenyu Xiao, Jie Wang, Teng Yuan Cheng, Kuiran Shi

Publication date 1 December 2020

Published in Discrete Dynamics in Nature and Society (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2020/9673623

Mathematics Subject Classification ID

Characterization and structure theory for multivariate probability distributions; copulas (62H05) Statistical methods; risk measures (91G70) Financial applications of other theories (91G80)

Review text

Summary: Financial data usually have the features of complexity and interdependence structure, such as asymmetric, tail, and time-varying dependence. This study constructs a new multivariate skewed fat-tailed copula, namely, noncentral contaminated normal (NCCN) copula, to analyze the dependent structure of financial market data. The dynamic conditional correlation (DCC) model is also incorporated into constructing the time-varying NCCN copula model. This study comprehensively examines the effects of the DCC-NCCN copula and related models on fitting dependence structures of Hong Kong stock markets. The results show that the DCC-NCCN copula model can better depict the dependence structures of returns. Considering the flexibility and complexity, the DCC-NCCN copula model is a relatively ideal, time-varying, multivariate skewed fat-tailed copula model.

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Cites work

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Cited in

(5)

• Vine-copula GARCH model with dynamic conditional dependence
• Risk estimation in exchange rate markets based on stochastic copula approach
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• Detecting financial data dependence structure by averaging mixture copulas
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