Vine copulas and applications to the European Union sovereign debt analysis

Zhang, D 2014, 'Vine copulas and applications to the European Union sovereign debt analysis' , International Review of Financial Analysis, 36 , pp. 46-56.

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European sovereign debt crisis has become a very popular topic since late 2009. In this paper, sovereign debt crisis is investigated by calculating the probabilities of the potential future crisis of 11 countries in the European Union. We use sovereign spreads of the European countries against Germany as targets and apply the GARCH based vine copula simulation technique. The methodology solves the difficulties of calculating the probabilities of rarely happening events and takes sovereign debt movement dependence, especially tail dependence, into consideration. Results indicate that Italy and Spain are the most likely next victims of the sovereign debt crisis, followed by Ireland, France and Belgium. The UK, Sweden and Denmark, which are outside the euro area, are the most financially stable countries in the sample.

Item Type: Article
Themes: Subjects outside of the University Themes
Schools: Schools > Salford Business School > Salford Business School Research Centre
Journal or Publication Title: International Review of Financial Analysis
Publisher: Elsevier
Refereed: Yes
ISSN: 10575219
Related URLs:
Funders: Non funded research
Depositing User: Dr Dalu Zhang
Date Deposited: 02 Feb 2015 11:37
Last Modified: 15 Feb 2022 19:03

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