Open Access Article SciPap-957
Effect of the Dependency Structure on the Market Risk Accuracy
by Tomáš Jeřábek 1,*

1 Katedra financí, Fakulta ekonomických studií, Vysoká škola finanční a správní, Estonská 500, Praha 10 – Vršovice 101 00, Czechia

* Authors to whom correspondence should be addressed.

Abstract: Knowledge the dependence between risk factors is very importance in risk management. The failure of traditional approaches to market risk measure motivates to investigate the relationship between financial markets. The aim of this paper is to examine the dependence between stock index returns and foreign exchange rate returns for six selected economies. In this context, it is detected evidence of dynamic and asymmetric dependence. It is empirically demonstrated that application of asymmetric dynamic copula improves the Value at Riks as well as Expected Shortfall estimates. Overall, the results show that the dependence structure of international financial markets is more complicated than the structure predicted by the traditional approaches to market risk measure.

Keywords: Value At Risk, Copula, Risk Management, Asymmetric Dependence

JEL classification:   C13 - Estimation: General,   C32 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes • State Space Models,   G11 - Portfolio Choice • Investment Decisions

SciPap 2018, 26(3), 957

Received: 1 January 2018 / Accepted: 27 June 2018 / Published: 23 November 2018