Paths and indices of maximal tail dependence

DOI10.1017/ASB.2015.10zbMATH Open1390.62089arXiv1405.1326OpenAlexW3121767812MaRDI QIDQ4563753FDOQ4563753

Authors: Edward Furman, Jianxi Su, Ričardas Zitikis 

Publication date: 4 June 2018

Published in: ASTIN Bulletin (Search for Journal in Brave)

Abstract: We demonstrate both analytically and numerically that the existing methods for measuring tail dependence in copulas may sometimes underestimate the extent of extreme co-movements of dependent risks and, therefore, may not always comply with the new paradigm of prudent risk management. This phenomenon holds in the context of both symmetric and asymmetric copulas with and without singularities. As a remedy, we introduce a notion of paths of maximal (tail) dependence and utilize it to propose several new indices of tail dependence. The suggested new indices are conservative, conform with the basic concepts of modern quantitative risk management, and are able to distinguish between distinct risky positions in situations when the existing indices fail to do so.

Full work available at URL: https://arxiv.org/abs/1405.1326

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zbMATH Keywords

copulamultivariate distributiontail dependenceenterprise risk managementmaximal dependencemultivariate Paretofatal shock

Mathematics Subject Classification ID

Statistics of extreme values; tail inference (62G32) Characterization and structure theory for multivariate probability distributions; copulas (62H05) Applications of statistics to actuarial sciences and financial mathematics (62P05)

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Cited In (14)

• Shock models with dependence and asymmetric linkages
• Multivariate directional tail-weighted dependence measures
• Comparing and quantifying tail dependence
• A tail-revisited Markowitz mean-variance approach and a portfolio network centrality
• A statistical methodology for assessing the maximal strength of tail dependence
• Assessing bivariate tail non-exchangeable dependence
• On the worst and least possible asymptotic dependence
• Tail dependence of the Gaussian copula revisited
• Tail diversification strategy. An application to MSCI World Sector Indices
• Tail maximal dependence in bivariate models: estimation and applications
• Measuring non-exchangeable tail dependence using tail copulas
• Multiple risk factor dependence structures: copulas and related properties
• Negative dependence concept in copulas and the marginal free herd behavior index
• Modeling bivariate data using linear exponential and Weibull distributions as marginals

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