Copula Model And Emperical Research On The Dependency Of The Financial Markets

On the background of financial globalization, the correlation among various components of financial markets become closer, price fluction in one market will cause another market's linkage response, dependency analysis between different markets men become a central issue of Finance. Among dependency analysis methods, the traditional linear correlation coefficient can only describe the linear dependencies between variables. Therefore, Copula techinique which can better capture the nonlinear dependencies between the variables become a popular method.Dependency models which used Copula as a core technology are deeply studied. In theory, reliability theory of the structural systems is transferred into the financial systems, then two types of bankruptcy risk calculation model are proposed, then Copula calculation model of the relevance reliability of the banking system is given, finally, example calculation of sample banking system shows that the approach is feasible.In the method, the evolution equation of time-varying Copula is improved. Based on Patton's conditional t-Copula evolution equation with time-varying parameters, combined with Bartram, Taylor & Wang's time-varying Gaussian Copula evolution equation, three new evolution equations that contain both lagged autocorrelation items and the absolute difference between the lagged cumulative probabilities of the two variables are proposed. The empirical analysis shows that the evolution equations are appropriate. Copula-CVaR risk assessment model based on Monte Carlo simulation techniques is used to discuss the impact of the choice of Copula function on investment decisions. Empirical test shows that a choice of assets under the model allows investors to choose more stable assets.Finally, used Copula as a core technique , supplemented by other dependency research methods , comprehensive empirical research on the financial market, mainly on stock markets and the foreign exchange markets are conducted and some valuable results are found. On the one hand, the dependence degree of china's stock market is analyzed from the sight of information transmission, volatility spillover and dependence seperately. The empirical results show that return information transmission between Hu,Gang stock market is not significant, the spillover between these two stock markets is also not significant and the correlation between them is small, the volatility of mainland's stock market has its relative independence. This tests that the openness degree of china's stock market is low, however, this openness speed is a kind of protection for china's stock market. On the other hand, Connection degree between exchange rate market and stock market is also analyzed. Mainly, long-term and short-term correlation between exchange rate market and stock market after the exchange rate regime transformation are studied. It is showed that there is long-term equilibrium correlation between exchange rate and the main stock index, however, there is only one directional short-term Granger causality relation from RMB exchange rate to the A-shares index. These results are consistent with the explanation based on the financial theory, at the same time, this tests that the short term change of exchange rate market has some conductive meaning to fluction of stock market, which deserves the investor's attention. This study has some important reference value to financial risk management and investment decisions.