2012-05-22Buch DOI: 10.18452/4407
Fengler, Matthias R.
We introduce the notion of realized copula. Based on assumptions of the marginal distri- butions of daily stock returns and a copula family, realized copula is defined as the copula structure materialized in realized covariance estimated from within-day high-frequency data. Copula parameters are estimated in a method-of-moments type of fashion through Hoeffding's lemma. Applying this procedure day by day gives rise to a time series of copula parameters that is suitably approximated by an autoregressive time series model. This allows us to capture time-varying dependency in our framework. Studying a portfolio risk-management applica- tion, we find that time-varying realized copula is superior to standard benchmark models in the literature.
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Is Part Of Series: Sonderforschungsbereich 649: Ökonomisches Risiko - 34, SFB 649 Papers, ISSN:1860-5664