Dependence Structure Analysis and VaR Estimation Based on China's and International Gold Price: A Copula Approach

摘要

Since 2013, China has become the world's largest gold producer and consumer. To gain the corresponding global pricing power in gold, many actions have been taken by China in recent years, including the International Board at Shanghai Gold Exchange, Shanghai-Hong Kong Gold Connect and Shanghai Gold Fix. Our work studies the dependence structure between China's and international gold price and examines whether these moves are changing the dependence structure. We use GARCH-copula models to detect the dynamic dependence and tail dependence. The research period is set to contain the Financial Crisis in 2008, the dramatical plunge of gold price in 2013 and a series of black swan events in 2016. The empirical study shows that some event driven dependence structure breaks are statistically insignificant. And the time-varying Symmetrized Joe-Clayton copula is the best copula to model the dependence structure based on AIC value. Finally, an example of applications of this dependence structure is given by estimating the VaR of an equally weighted portfolio with a simulation-based method.