Research On The Correlation Of Financial Markets Based On The Copula Method

With the continuous development of electronic information industry,the global trade continues to expand.The development of the world economic integration is more and more rapid,and the correlation between financial markets is becoming stronger and stronger.The financial crisis in the United States led to the global economic recession,will bring a great loss to the financial markets,so the study of correlation between financial market,is of great help to the risk control and investment portfolio.Study on the correlation between traditional methods and related research can only be linear and symmetrical,and the variable is smooth and obeys the normal distribution,but the financial data are usually peak and thick tail and skewness characteristics,do not obey the standard normal distribution,and the relationship between them is nonlinear,so the traditional correlation method can't describe the correlation between the financial data well.Now more and more scholars use the Copula model to study the relationship between the Copula function can not only describe the relationship between linear and symmetrical,but also describe the relationship between nonlinear and asymmetric,but the relation of Copula model mainly studies the two-dimensional variable,are unable to measure the correlation among variables.This paper mainly studies the relationship between the international crude oil market,the foreign exchange market,the gold futures market and the Chinese stock market by using vine Copula model.The vine Copula model can be used to model the marginal distribution of multidimensional random variables and the related structures separately from the relevant structure and does not require that the marginal distribution of the variables has the same pattern.Through the processing of data,first,we fit the marginal distribution of the four sets of data,and then use the vine Copula,which can simultaneously examine the multi-market correlation,to describe the joint distribution of the logarithmic returns of the four markets.This paper describes the dependence structure between the four financial markets: the international crude oil futures market,the RMB exchange market,the gold futures market and the Chinese stock market.Since the reform and opening up,China's economic development is becoming faster and faster,the demand for energy is also increasing,including the demand for oil,so China needs a large number of foreign imports of oil,so the international oil price volatility which is bound to China's economy will have an impacton the domestic enterprises and individuals.Exchange rateis very important for the import and export trade,and exchange rate volatility is directly related to the costs and profits of these enterprises.Gold has a hedge against inflation and has an excellent hedge function.In the futures market,gold occupies an important position as a commodity,and gold futures are directly dominating the global gold price.China is the world's third largest consumer of gold,the first gold-producing countries,so the gold price changes on China's financial market will have a greater impact.The stock market is a manifestation of a country's economy that reflects the state of economic development and investor expectations of the market.So look at how a country's economic develop,you can first look at the country's stock market.Therefore,the study of the international crude oil market,the foreign exchange market and the gold futures market and a country's economy can be seen as the relationship between the three financial markets and the stock market correlation.The empirical results show: t-Copula function is the best function to describe the binary correlation,and C vine Copula function is better than D vine.The correlation between the four markets is almost always tail symmetric,and the crude oil futures market takes the leading position in four markets.Crude oil and stock,crude oil and gold,gold and stock are positively correlated.However crude oil and exchange,exchange and stock,exchange and gold are negatively correlated.Stock and gold under the condition in the crude oil and exchange show the lowest degree of correlation.