A STATISTICAL METHODOLOGY FOR ASSESSING THE MAXIMAL STRENGTH OF TAIL DEPENDENCE

Ning Sun, Chen Yang and Ričardas Zitikis

ASTIN Bulletin, 2020, vol. 50, issue 3, 799-825

Abstract: Several diagonal-based tail dependence indices have been suggested in the literature to quantify tail dependence. They have well-developed statistical inference theories but tend to underestimate tail dependence. For those problems when assessing the maximal strength of dependence is important (e.g., co-movements of financial instruments), the maximal tail dependence index was introduced, but it has so far lacked empirical estimators and statistical inference results, thus hindering its practical use. In the present paper, we suggest an empirical estimator for the index, explore its statistical properties, and illustrate its performance on simulated data.

Date: 2020
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