Tail risk interdependence

Polanski, Arnold ORCID: https://orcid.org/0000-0001-9146-6364, Stoja, Evarist and Chiu, Ching-Wai (2021) Tail risk interdependence. International Journal of Finance and Economics, 26 (4). pp. 5499-5511. ISSN 1076-9307

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We present a framework focused on the interdependence of high-dimensional tail events. This framework allows us to analyse and quantify tail interdependence at different levels of extremity, decompose it into systemic and residual part and to measure the contribution of a constituent to the interdependence of a system. In particular, tail interdependence can capture simultaneous distress of the constituents of a (financial or economic) system and measure its systemic risk. We investigate systemic distress in several financial datasets confirming some known stylized facts and discovering some new findings. Further, we devise statistical tests of interdependence in the tails and outline some additional extensions.

Item Type: Article
Uncontrolled Keywords: co-exceedance,risk interdependence,relative entropy,risk contribution,systemic risk
Faculty \ School: Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Groups > Applied Econometrics And Finance
Faculty of Social Sciences > Research Groups > Economic Theory
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Depositing User: LivePure Connector
Date Deposited: 14 Sep 2020 07:17
Last Modified: 14 May 2023 00:35
URI: https://ueaeprints.uea.ac.uk/id/eprint/76854
DOI: 10.1002/ijfe.2077

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