The Dynamic Tail Dependence Risk between ZXI and CSCS: A Time-varying Copula Approach

The purpose of this paper is to study the dynamic tail dependence structures between ZXI and CSCS by the use of extreme value theory and time-varying copula,a reflection of China's share markets increasing integration into the Greater Chins share markets. We used ARMA-GJR-SKST-GPD model needs to estimate the threshold values in order to exactly fit the margin distribution of Stochastic Copula functions. We also found the time-varying Copula to show that time-varying SJC Copula outperform both the constant parameters copula and others time-varying Copula. The empirical analysis proves that the combination of both model captures the VaR of the portfolio more successfully.