Research on the Risk Spillover Effect Applying the EVT–Copula–CoVAR Model

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JEL classification

• Model Construction and Estimation
• International Financial Markets
• Financial Forecasting and Simulation

Keywords

Research on the Risk Spillover Effect Applying the EVT–Copula–CoVAR Model

Abstract

The goal of this paper is to apply the extreme value theory, copula function and conditional value-at-risk method. Specifically, the EVT–copula–CoVaR model is constructed and combined with the Copula function to analyse the dynamic correlation between the price of gold and the world’s major stock markets. On the basis of the proposed model and results, the conditional value at risk (CoVaR) and the marginal risk spillover effect (ΔCoVaR) measures are used to analyse the impact of gold prices on the world’s major stock markets. The empirical results show that the fluctuation of the gold price has a certain risk spillover effect on the world’s major stock markets.