Related papers: Tail Dependence of Factor Models

We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…

Recently, the concept of tail dependence has been discussed in financial applications related to market or credit risk. The multivariate extreme value theory is a proper tool to measure and model dependence, for example, of large loss…

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…

We propose a novel probabilistic model to facilitate the learning of multivariate tail dependence of multiple financial assets. Our method allows one to construct from known random vectors, e.g., standard normal, sophisticated joint…

Measures of tail dependence between random variables aim to numerically quantify the degree of association between their extreme realizations. Existing tail dependence coefficients (TDCs) are based on an asymptotic analysis of relevant…

In risk management, tail risks are of crucial importance. The quality of a tail model, which is determined by data from an unknown distribution, depends critically on the subset of data used to model the tail. Based on a suitably weighted…

Tail dependence refers to clustering of extreme events. In the context of financial risk management, the clustering of high-severity risks has a devastating effect on the well-being of firms and is thus of pivotal importance in risk…

Analysing dependent risks is an important task for insurance companies. A dependency is reflected in the fact that information about one random variable provides information about the likely distribution of values of another random…

Due to globalization and relaxed market regulation, we have assisted to an increasing of extremal dependence in international markets. As a consequence, several measures of tail dependence have been stated in literature in recent years,…

Modelling multivariate tail dependence is one of the key challenges in extreme-value theory. Multivariate extremes are usually characterized using parametric models, some of which have simpler submodels at the boundary of their parameter…

This book chapter illustrates how to apply extreme value statistics to financial time series data. Such data often exhibits strong serial dependence, which complicates assessment of tail risks. We discuss the two main approches to tail risk…

A common object to describe the extremal dependence of a $d$-variate random vector $X$ is the stable tail dependence function $L$. Various parametric models have emerged, with a popular subclass consisting of those stable tail dependence…

In risk management, tail risks are of crucial importance. The assessment of risks should be carried out in accordance with the regulatory authority's requirement at high quantiles. In general, the underlying distribution function is…

Tail dependence plays an essential role in the characterization of joint extreme events in multivariate data. However, most standard tail dependence parameters assume continuous margins. This note presents a form of tail dependence suitable…

The task for a general and useful classification of the tail behaviors of probability distributions still has no satisfactory solution. Due to lack of information outside the range of the data the tails of the distribution should be…

For a risk vector $V$, whose components are shared among agents by some random mechanism, we obtain asymptotic lower and upper bounds for the individual agents' exposure risk and the aggregated risk in the market. Risk is measured by…

We study large deviation probabilities for a sum of dependent random variables from a heavy-tailed factor model, assuming that the components are regularly varying. We identify conditions where both the factor and the idiosyncratic terms…

We consider the tail probabilities of stock returns for a general class of stochastic volatility models. In these models, the stochastic differential equation for volatility is autonomous, time-homogeneous and dependent on only a finite…

We analyze the statistical dependency structure of the S&P 500 constituents in the 4-year period from 2007 to 2010 using intraday data from the New York Stock Exchange's TAQ database. With a copula-based approach, we find that the…

We introduce a statistical model for operational losses based on heavy-tailed distributions and bipartite graphs, which captures the event type and business line structure of operational risk data. The model explicitly takes into account…