Tail maximal dependence in bivariate models: estimation and applications

Mathematical Methods of Statistics

40 Pages Posted: 14 Jul 2020 Last revised: 12 Sep 2022

See all articles by Ning Sun

Ning Sun

Agri-Food Analytics Lab; Dalhousie University

Chen Yang

Icahn School of Medicine at Mount Sinai

Ricardas Zitikis

Western University

Date Written: July 26, 2022

Abstract

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

Suggested Citation

Sun, Ning and Yang, Chen and Zitikis, Ricardas, Tail maximal dependence in bivariate models: estimation and applications (July 26, 2022). Mathematical Methods of Statistics , Available at SSRN: https://ssrn.com/abstract=3631426 or http://dx.doi.org/10.2139/ssrn.3631426

Ning Sun

Agri-Food Analytics Lab ( email )

6100 University Avenue
Halifax, Nova Scotial
Halifax
Canada

Dalhousie University ( email )

6100 University Avenue
Halifax, Nova Scotia
Canada

Chen Yang

Icahn School of Medicine at Mount Sinai ( email )

United States

Ricardas Zitikis (Contact Author)

Western University ( email )

1151 Richmond Street
Suite 2
London, Ontario N6A 5B8
Canada

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