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Tail Dependence of Eurozone Bond Yields and Sovereign CDS Spreads

In: Artificial Intelligence and Beyond for Finance

Author

Listed:
  • Veni Arakelian
  • Roberto Savona
  • Marika Vezzoli

Abstract

Using machine learning techniques, we detect clusters with high tail dependence obtained through a flexible threshold copula model applied pairwise to the Eurozone sovereign bond yields and credit default swap spreads. Our approach is also useful to inspect the evolution of the loss distribution, as we prove by computing a theoretical portfolio based on Clayton and Gumbel copulas for the highest values of the association parameters estimated by the model.

Suggested Citation

  • Veni Arakelian & Roberto Savona & Marika Vezzoli, 2024. "Tail Dependence of Eurozone Bond Yields and Sovereign CDS Spreads," World Scientific Book Chapters, in: Marco Corazza & RenĂ© Garcia & Faisal Shah Khan & Davide La Torre & Hatem Masri (ed.), Artificial Intelligence and Beyond for Finance, chapter 7, pages 265-287, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800615212_0007
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    More about this item

    Keywords

    Artificial Intelligence; Machine Learning; Deep Learning; Reinforcement Learning; Sentiment Analysis; Portfolio Management; Financial Forecasting;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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