Analysis Of Sub-prime Loan Crisis Contagion Based On Non-Parametric Time-varying Copula

As the development of global financial economic integration, especially financial innovations, extensive financial crisis gradually begin to occur frequently. Evident contagions are characterized by those financial crisis. Currently, most of the research on financial crisis contagion just focus on detecting the existence of contagion, which seems to have some obvious disadvantages:some of them ignore the non-linear and asymmetric interdependence structure among financial markets, some of them can just analyze financial crisis contagion statically but not the dynamic development process, but it is always our investors’concern, so how to solve those problem becomes the target of this paper.The paper introduce non-parametric time-varying copula into the detection of financial crisis based on its and characteristics and advantages. Firstly, our paper systematically introduce financial crisis and the research status of copula theory. Secondly, we present the definition, property and some general functions of copula, the method of parameter estimation and fitness test are also presented.Moreover, copula method are applied to analyze financial crisis contagion which based on the non-parametric time-varying model, the empirical result shows that copula method is very effective in the area of financial crisis contagion analysis.Lastly, the paper applied the model above to the analysis of sub-prime crisis contagion, the result shows that it is able to describe the contagious process very well which compensate the deficiency of previous models. The most significant contribution of the model is that it can perfectly capture the complicated dependence structure of financial market by tail dependence coefficient and observe the dynamic process. It solves the problem in the area of financial contagion detection, and also enrich the current financial research system.