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The Role of Asian Credit Default Swap Index in Portfolio Risk Management

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Robustness in Econometrics

Part of the book series: Studies in Computational Intelligence ((SCI,volume 692))

Abstract

This paper aims at evaluating the performance of Asian Credit Default Swap (CDS) index in risk measurement and portfolio optimization by using several multivariate copulas-GARCH models with Expected Shortfall and Sharpe ratio. Multivariate copula-GARCH models consider the volatility and dependence structures of financial assets so that they are conductive to accurately predict risk and optimal portfolio. We find that vine copulas have better performance than other multivariate copulas in model estimation, while the multivariate T copulas have better performance than other kinds of copulas in risk measurement and portfolio optimization. Therefore, the model estimation, risk measurement, and portfolio optimization in empirical study should use different copula models. More importantly, the empirical results give evidences that Asian CDS index can reduce risk.

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Acknowledgements

The financial support from the Puay Ungphakorn Centre of Excellence in Econometrics is greatly acknowledged. We would also like to express our gratitude to the many colleagues with whom, through the years, we have had the pleasure of discussing ideas on copulas and their applications.

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Authors and Affiliations

  1. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Jianxu Liu, Chatchai Khiewngamdee & Songsak Sriboonchitta

Authors
  1. Jianxu Liu
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  2. Chatchai Khiewngamdee
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  3. Songsak Sriboonchitta
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Corresponding author

Correspondence to Jianxu Liu .

Editor information

Editors and Affiliations

  1. Department of Computer Science, University of Texas at El Paso Department of Computer Science, El Paso, TX, USA

    Vladik Kreinovich

  2. Faculty of Economics, Chiang Mai University Faculty of Economics, Chiang Mai, Thailand

    Songsak Sriboonchitta

  3. Japan Adv. Inst. of Sci. & Tech. (JAIST) , Ishikawa, Japan

    Van-Nam Huynh

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Liu, J., Khiewngamdee, C., Sriboonchitta, S. (2017). The Role of Asian Credit Default Swap Index in Portfolio Risk Management. In: Kreinovich, V., Sriboonchitta, S., Huynh, VN. (eds) Robustness in Econometrics. Studies in Computational Intelligence, vol 692. Springer, Cham. https://doi.org/10.1007/978-3-319-50742-2_26

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  • DOI: https://doi.org/10.1007/978-3-319-50742-2_26

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-50741-5

  • Online ISBN: 978-3-319-50742-2

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