Tail Dependence of Eurozone Sovereign CDS Spreads
19 Pages Posted: 8 Aug 2018
Date Written: July 19, 2018
Abstract
Using a flexible threshold copula model, we investigate the pairwise tail dependence of Eurozone sovereign credit default swap spreads during the period 2008-2013 and we detect clusters of credit default swaps with high tail dependence. Our approach is also useful to inspect the evolution of the loss distribution, as we prove by computing a theoretical portfolio based on Clayton and Gumbel copula for the highest values of the association parameters estimated by the model.
Keywords: copula, credit default swaps, tail dependence, loss portfolio distribution
JEL Classification: G12, G01
Suggested Citation: Suggested Citation
Arakelian, Veni and Savona, Roberto and Vezzoli, Marika, Tail Dependence of Eurozone Sovereign CDS Spreads (July 19, 2018). Available at SSRN: https://ssrn.com/abstract=3216584 or http://dx.doi.org/10.2139/ssrn.3216584
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