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Keywords:

  • copula functions;
  • Archimedean copula;
  • tail dependence;
  • Random Fores

Abstract

In this paper we propose a heuristic strategy aimed at selecting and analysing a set of financial assets, focusing attention on their multivariate tail dependence structure. The selection, obtained through an algorithmic procedure based on data mining tools, assumes the existence of a reference asset we are specifically interested to. The procedure allows one to opt for two alternatives: to prefer those assets exhibiting either a minimum lower tail dependence or a maximum upper tail dependence. The former could be a recommendable opportunity in a financial crisis period. For the selected assets, the tail dependence coefficients are estimated by means of a proper multivariate copula function. Copyright © 2010 John Wiley & Sons, Ltd.