Tail maximal dependence in bivariate models: estimation and applications
Mathematical Methods of Statistics
40 Pages Posted: 14 Jul 2020 Last revised: 12 Sep 2022
Date Written: July 26, 2022
Assessing dependence within co-movements of financial instruments has been of much interest in risk management. Typically, indices of tail dependence are used to quantify the strength of such dependence, although many of the indices underestimate the strength. Hence, we advocate the use of a statistical procedure designed to estimate the maximal strength of dependence that can possibly occur among the co-movements. We illustrate the procedure using simulated and real data-sets.
Keywords: extreme co-movement, maximal tail dependence, financial instrument, statistical hypothesis
JEL Classification: C13, C15, C18, C58, C63, G17
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