Localizing Multivariate CAViaR

IRTG 1792 Discussion Paper 2019-007

46 Pages Posted: 31 Aug 2020 Last revised: 3 Mar 2022

See all articles by Xiu Xu

Xiu Xu

Soochow University

Wolfgang Karl Härdle

Blockchain Research Center Humboldt-Universität zu Berlin; Charles University; National Yang Ming Chiao Tung University; Asian Competitiveness Institute

Date Written: March 3, 2021


Risk transmission among financial markets and their participants is time- evolving, especially for the extreme risk scenarios. Possibly sudden time variation of such risk structures ask for quantitative technology that is able to cope with such situations. Here we present a novel localized multivariate CAViaR-type model to respond to the challenge of time-varying risk contagion. For this purpose a local adaptive approach determines homogeneous, low risk variation intervals at each time point. Critical values for this technique are calculated via multiplier bootstrap, and the statistical properties of this “localized multivariate CAViaR” are derived. A comprehensive simulation study supports the effectiveness of our approach in detecting structural change in multivariate CAViaR. Finally, when applying for the US and German financial markets, we can trace out the dynamic tail risk spillovers and find that the US market appears to play dominate role in risk transmissions, especially in volatile market periods.

Keywords: conditional quantile auto-regression, local parametric approach, change point detection, multiplier bootstrap

JEL Classification: C32, C51, G17

Suggested Citation

Xu, Xiu and Härdle, Wolfgang Karl, Localizing Multivariate CAViaR (March 3, 2021). IRTG 1792 Discussion Paper 2019-007 , Available at SSRN: https://ssrn.com/abstract=3658128

Xiu Xu (Contact Author)

Soochow University ( email )

No. 1 Shizi Street
Suzhou, Jiangsu 215006

Wolfgang Karl Härdle

Blockchain Research Center Humboldt-Universität zu Berlin ( email )

Unter den Linden 6
Berlin, D-10099

Charles University ( email )

Celetná 13
Dept Math Physics
Praha 1, 116 36
Czech Republic

National Yang Ming Chiao Tung University ( email )

No. 1001, Daxue Rd. East Dist.
Hsinchu City 300093

Asian Competitiveness Institute ( email )


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