A METHOD FOR SYSTEMIC RISK ESTIMATION BASED ON CDS INDICES

Gabriel Gaiduchevici ()
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Gabriel Gaiduchevici: Bucharest University of Economic Studies, Bucharest, Romania

Review of Economic and Business Studies, 2015, issue 15, 103-124

Abstract: The copula-GARCH approach provides a flexible and versatile method for modeling multivariate time series. In this study we focus on describing the credit risk dependence pattern between real and financial sectors as it is described by two representative iTraxx indices. Multi-stage estimation is used for parametric ARMA-GARCH-copula models. We derive critical values for the parameter estimates using asymptotic, bootstrap and copula sampling methods. The results obtained indicate a positive symmetric dependence structure with statistically significant tail dependence coefficients. Goodness-of-Fit tests indicate which model provides the best fit to data.

Keywords: copula; CDS; tail dependence; systemic risk (search for similar items in EconPapers)
JEL-codes: C15 C32 C51 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:aic:revebs:y:2015:j:15:gaiduchevicig

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