Wavelet - Pair Copula Construction Inference for Financial Contagion
نویسندگان
چکیده
In this paper we propose a Wavelet Pair Copula Construction approach for contagion identification. The method consists in filtering past marginal dependence, performing multiscale decomposition in marginal residuals, and estimating a Pair Copula Construction for each frequency scale of interest. We carry out these steps with daily data from U.S., German, Brazilian and Hong Kong MSCI indices. The procedure is realized for non-crisis and crisis (sub-prime and Eurozone) periods. We find results that indicate a rising in association for most relationships, representing presence of contagion effect during Sub-prime and Eurozone crises. Key-Words: Risk Analysis, Contagion, Wavelets, Pair Copula Construction, financial markets, dependence.
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