A factor contagion model for portfolio credit derivatives

Choe, Geon Ho; Jang, Hyun Jin; Kwon, Soon Won

doi:10.1080/14697688.2014.976651

Cited by 2 publications

(1 citation statement)

References 26 publications

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“…The studies related to spread of volatility shocks amongst several countries, provide crucial information due to its consequences for understanding international asset pricing, assessing investment, leverage decisions and portfolio allocation. Additionally, it also assists in developing diversification strategies (Choe et al, 2015).…”

Section: Jes 492mentioning

confidence: 99%

Measuring contagion during COVID-19 through volatility spillovers of BRIC countries using diagonal BEKK approach

Malik

Sharma

Kaur

2021

JES

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PurposeThe outbreak of the coronavirus disease 2019 (COVID-19) pandemic is an unprecedented shock to the BRICS (Brazil, Russia, India, China, South Africa) economy and their financial markets have plummeted significantly due to it. This paper adds to the recent literature on contagion due to spillover by uniquely examining the presence of pairwise contagion or volatility transmissions in stock markets returns of India, Brazil, Russia, China and USA prior to and during COVID-19 pandemic period.Design/methodology/approachIn this study, the generalised autoregressive conditional heteroskedasticity (GARCH) by Bollerslev (1986) under diagonal parameterization is used to estimate multivariate GARCH framework also known as BEKK (Baba EngleKraft and Kroner) model on stock market returns of BRIC nations and the US.FindingsThe empirical results show that the model captures the volatility spillovers and display statistical significance for own past mean and volatility with both short- and long-run persistence effects. Own volatility spillovers (Heatwave phenomenon) have been found to be highest for the US, China and Brazil compared to Russia and India. The coefficients indicate persistence of volatility for each country in terms of its own past errors. The highest and long-term spillover effect is found between US and Russia. The results recommend that Russia is least vulnerable to outside shocks. Finally after examining the pairwise results, it is suggested that the BRIC countries stock indices have exhibited volatility spillover due to the COVID-19 pandemic.Research limitations/implicationsThe study may be extended to include other emerging market economies under a dynamic framework.Practical implicationsResearchers and policymakers may draw useful insights on cross-market interdependencies regarding the spillovers in BRIC countries' stock markets. It also helps design international portfolio diversification strategies and in constructing optimal portfolios during COVID and in a post-COVID world.Originality/valueCOVID-19 has been an improbable event in the history of the world which can have a large impact on the financial economies across the emerging countries. This event can be deemed to be informative enough to measure the co-movements of the equity markets amongst cross-country return series, which has not been investigated so far for BRIC nations.

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Section: Jes 492mentioning

confidence: 99%

Measuring contagion during COVID-19 through volatility spillovers of BRIC countries using diagonal BEKK approach

Malik

Sharma

Kaur

2021

JES

View full text Add to dashboard Cite

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A Generalized Error Distribution Copula-based method for portfolios risk assessment

Cerqueti

Giacalone

Panarello

2019

Physica A: Statistical Mechanics and its Applications

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In this paper, we deal with the evaluation of Conditional Value-at-Risk in the framework of portfolio theory by using a modified Gaussian Copula -where the modification is obtained by introducing the Generalized Correlation Coefficient -and by assuming a Generalized Error Distribution with properly estimated shape parameter p for the returns of the considered risky assets. In so doing, we add to the connection between standard Copula theory and financial risk assessment. A comparison analysis of our findings with those obtainable through a standard Gaussian Copula-based procedure in a set of real data is also presented.

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A factor contagion model for portfolio credit derivatives

Cited by 2 publications

References 26 publications

Measuring contagion during COVID-19 through volatility spillovers of BRIC countries using diagonal BEKK approach

Measuring contagion during COVID-19 through volatility spillovers of BRIC countries using diagonal BEKK approach

A Generalized Error Distribution Copula-based method for portfolios risk assessment

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