Tail Dependence of Eurozone Sovereign CDS Spreads

19 Pages Posted: 8 Aug 2018

See all articles by Veni Arakelian

Veni Arakelian

Council of Economic Advisors, Ministry of Finance, Hellenic Republic; UCL Centre for Blockchain Technologies

Roberto Savona

University of Brescia - Department of Economics and Management

Marika Vezzoli

University of Brescia

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

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

Veni Arakelian

Council of Economic Advisors, Ministry of Finance, Hellenic Republic ( email )

5-7 Nikis str
Athens, 10180
Greece

UCL Centre for Blockchain Technologies ( email )

Malet Place
London, London WC1E 6BT
United Kingdom

Roberto Savona (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Marika Vezzoli

University of Brescia ( email )

Piazza del Mercato, 15
25122 Brescia
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
61
Abstract Views
557
Rank
759,058
PlumX Metrics