Research on the correlation of Shanghai composite index and the SP500 index based on M-Copula-EGARCH

摘要

As economic globalization is accelerating, financial products of different regions have become more closely linked. This paper analyzes closed price series of the Shanghai Composite Index and the S&P500 stock index. At first, it uses EGARCH function to portray the marginal distribution of stock index price series, and finds that the EGARCH function can obtain better results compared to traditional fitting functions; then it uses the M-Copula function to connect the portrayed model, and makes parameters estimation and model checking; finally, it applies Monte Carlo method to simulate the fitted M-Copula function model based on EGARCH function, and calculates the value at risk VaR. Through the effective combination of EGARCH, M-Copula, VaR and other technologies, we overcome the problems of non-linearity and non-normality among different assets in the portfolio, and provide a new idea for portfolio selection, risk measurement and control.