Dependence Analysis of the ISE100 Banking Sector Using Vine Copula

Bukre Yildirim Kulekci (), Gulden Poyraz, Ismail Gur and Ozan Evkaya
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Bukre Yildirim Kulekci: Technical University of Kaiserslautern, Department of Mathematics, Kaiserslautern, Germany
Gulden Poyraz: Bandirma Onyedi Eylul University, Foreign Department of Commerce, Balikesir, Turkiye
Ismail Gur: Dr. Student, Hacettepe University, Actuary Department of Sciences, Ankara, Turkiye
Ozan Evkaya: Edinburgh, University of Edinburgh, Department of Mathematics, Edinburgh, England

Istanbul Journal of Economics-Istanbul Iktisat Dergisi, 2023, vol. 73, issue 73-1, 55-81

Abstract: The frequently observed time-varying trends and dependence in recent years within financial markets have been essential for modeling and pricing. This study aims to analyze the dependence structure of banking sector stocks traded on the ISE100 index using time series and regular vine (R-vine) copula models. The study calculates the risk measures of value-at-risk (VaR) and expected shortfall (ES) and tests with backtesting methods for the portfolio that are constructed by equally weighting the banking stocks. This study’s findings on banking stocks specifically indicate that the application of the R-vine copula combined with the generalized auto-regressive conditional heteroskedasticity (GARCH) model improved the VaR and ES estimates compared to traditional GARCH-based approaches..

Keywords: Vine copula; Financial market; Risk measures JEL Classification: G32; C32; C58 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ist:journl:v:73:y:2023:i:1:p:55-81

DOI: 10.26650/ISTJECON2022-1229039

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