Work

Estimation of Contagion: Bayesian Model Averaging on Tail Dependence of Mixture Copula

Year: 2024

Type: article

Abstract: This study introduces a novel approach to estimate tail dependence in financial contagion using mixture copulas. Addressing the challenges of weight parameter estimation in conventional models, we propose a Bayesian model averaging method to determine optimal copula weights. Through both simulations and empirical studies, the proposed method demonstrates improved robustness and accuracy, particularly when handling extreme weight scenarios. These advancements offer more reliable measurements of financial contagion, contributing to enhanced risk management and policy-making in interconnected financial markets.

Source: Mathematics

DOI: 10.3390/math12213350

Authors: Sundusit Saekow, Phisanu Chiawkhun, Woraphon Yamaka, Nawapon Nakharutai, Parkpoom Phetpradap

Institution: Chiang Mai University

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,955

Funder: Chiang Mai University