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Modelling multivariate dependence

The project studies the multivariate dependence structure of volatilities in Australian and other international stock markets.

The Global Financial Crisis and the recent and ongoing distress in Europe has demonstrated the impact of one market volatility on other.

Volatility modelling is very important in risk modelling, portfolio management and option pricing. Realized volatility is an approach of calculating volatility using high frequency intraday returns.

Research methods

The statistical tool which is used to model the underlying dependence structure of a multivariate distribution is the copula function.

Traditionally copula are used to model bivariate dependence structures but with the introduction of new set of copulas called Vine Copulas (Joe, 1996; Bedford and Cooke, 2001; Aas et al, 2009 and Cszado, 2010) they can now be used to model more than two dimensions.

Vin computing is used for calculations with high frequency data obtained from SIRCA.

Researchers

Funding body

Edith Cowan University Early Career Research Grant.

Timeline

This project commenced January 2013 and is ongoing.

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