WORLD FINANCIAL RELATIONS: UNDERSTANDING THE CREDIT DERIVATIVE SWAPS (CDS) DEPENDENCE STRUCTURES

Authors

  • Fernanda Maria Müller Pós Graduação em Administração, Universidade Federal do Rio Grande do Sul – RS / Brasil
  • Marcelo Brutti Righi Professor da Escola de Administração, Pós Graduação em Administração, Universidade Federal do Rio Grande do Sul – RS / Brasil
  • Anderson Luis Walker Amorin Doutorando - Pós Graduação em Engenharia de Produção, Universidade Federal do Rio Grande do Sul – RS / Brasil

Keywords:

Credit Derivative Swaps, Model risk, Vine Copulas

Abstract

This study investigates the copula model that best fit to model the dependence structure of Credit Derivative Swaps (CDS) spreads. For the analysis, we consider daily data from the period of January 1, 2009 to December 31, 2014. Regarding the models, we considered Vine copulas and Hierarchical Archimedean copulas, and different families of copulas. Our results indicate that C-Vine copulas, as well Student t family, demonstrated better performance, according to the criteria used to get the dependence structure. The best fit of the dependence structure can avoid the model risk, from the use of an incorrect model. 

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Author Biography

Fernanda Maria Müller, Pós Graduação em Administração, Universidade Federal do Rio Grande do Sul – RS / Brasil

Doutoranda em Administração, área Finanças, da Escola de Administração

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Published

2018-09-03

How to Cite

Müller, F. M., Righi, M. B., & Amorin, A. L. W. (2018). WORLD FINANCIAL RELATIONS: UNDERSTANDING THE CREDIT DERIVATIVE SWAPS (CDS) DEPENDENCE STRUCTURES. Electronic Review of Administration, 24(2), 218–229. Retrieved from https://seer.ufrgs.br/index.php/read/article/view/78321

Issue

Vol. 24 No. 2 (2018): MAIO / AGOSTO

Section

Articles

License

 

The author holds authorship rights, and authorizes REAd to publish the article on its website or in printed editions, not implying the payment of copyright or any other fee to the authors, and certifies that this article has not been published, to date, in any Brazilian journal.