On the dependence of equity and asset returns
Asset returns play an important role in credit risk modelling. Here, Roy Mashal, Marco Naldiand Assaf Zeevi investigate the co-dependence behaviour of asset returns semiparamatrically.They find that the Student-t copula outperforms the normal copula as adescription of the co-dependence structure. They also find that the joint tail dependence ofequity and asset returns is similar, suggesting that equity returns are a good proxy for assetreturns, both for investment-grade and high-yield names
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