Volatility Spillover Analysis and Empirical Studyon the Financial Market Based on Copula Theory

Abstract

It is very important to mensurate the volatility spillover for the dynamic investment portfolio and risk management. The known literature is based on linear correlation of the volatility between different financial markets, however, linear correlation cannot describe the non-linear relationship between the financial markets. We use Copula technology to describe the non-linear relationship between the financial markets and SV models to depict the marginal distribution of the data of the financial markets, and by introducing Volatility Structural Change to analyze volatility spillover, empirically analyze the feasibility of the method.