TailCoR
Statistical Finance
2020-12-01 v1 Applications
Methodology
Abstract
Economic and financial crises are characterised by unusually large events. These tail events co-move because of linear and/or nonlinear dependencies. We introduce TailCoR, a metric that combines (and disentangles) these linear and non-linear dependencies. TailCoR between two variables is based on the tail inter quantile range of a simple projection. It is dimension-free, it performs well in small samples, and no optimisations are needed.
Cite
@article{arxiv.2011.14817,
title = {TailCoR},
author = {Slađana Babić and Christophe Ley and Lorenzo Ricci and David Veredas},
journal= {arXiv preprint arXiv:2011.14817},
year = {2020}
}