Nonparametric tests for constant tail dependence with an application to energy and finance

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2013-08-14

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Abstract

The present paper proposes new tests for detecting structural breaks in the tail dependence of multivariate time series using the concept of tail copulas. To obtain asymptotic properties, we derive a new limit result for the sequential empirical tail copula process. Moreover, consistency of both the tests and a change-point estimator are proven. We analyze the finite sample behavior of the tests by Monte Carlo simulations. Finally, and crucial from a risk management perspective, we apply the new findings to datasets from energy and financial markets.

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Keywords

Change-point detection, Multiplier bootstrap, Tail dependence, Weak convergence

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