Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87176
Authors: 
Stefanova, Denitsa
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-125/IV/DSF45
Abstract: 
The paper proposes a model for the dynamics of stock prices that incorporates increased asset co-movements during extreme market downturns in a continuous-time setting. The model is based on the construction of a multivariate diffusion with a pre-specified stationary density with tail dependence. I estimate the model with Markov Chain Monte Carlo using a sequential inference procedure that proves to be well-suited for the problem. The model is able to reproduce stylized features of the dependence structure and the dynamic behaviour of asset returns.
Subjects: 
tail dependence
multivariate diffusion
Markov Chain Monte Carlo
JEL: 
C11
C51
C58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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