Multidimensional copula models for parallel development of the US bond market indices
Stock and bond markets co-movements have been studied by many researchers. The object of our investigation is the development of three U.S. investment grade corporate bond indices. We concluded that the optimal 3D as well as partial pairwise 2D models are in the Student class with 2 degrees of freedom (and thus very heavy tails) and exhibit very high values of tail dependence coefficients. Hence the considered bond indices do not represent suitable components of a well-diversified investment portfolio. On the other hand, they could make good candidates for underlying assets of derivative instruments.... [Show full abstract]
Keywordsbond market indices; copulas; Cramer-von Mises test statistics; GoF test; Vuong and Clarke tests
Fields of Research140210 International Economics and International Finance; 1502 Banking, Finance and Investment; 150205 Investment and Risk Management
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