Document Type : Research Paper
Authors
1
Department of Financial Engineering،, Faculty of Industrial and Systems Engineering،, Tarbiat Modares University،, Tehran, Iran
2
Department of Financial Engineering،, Faculty of Industrial Engineering and Systems ،, Tarbiat Modares University،, Tehran, Iran
Abstract
Examining the structure of dependence between financial assets and the effects of their Co-movement is one of the important issues in financial markets. Copula is one of the most complex and convenient ways to investigate this issue. This paper examines regime change probability and best copula model between Bitcoin and 6 other assets since 2018 to 2021. first, using the ARMA-GARCH model, the margin distribution functions for all assets and residuals are calculated. Then, using the obtained residuals, 11 models copula include normal Copula, T-Student, Clayton, Gamble, Joe, Rotated Gamble, rotated Clayton, BB1, BB6, BB7 and BB8 and 6 models of conbined Copula with Markov switching including MS-CN MS-CT, MS-CG, MS-CC, MS-CRC, MS-CRG were implemented. the model that has the best function for constructing combined distribution functions are selected. At the end, the regime probabilities in each time are calculated from best fitted model. The results show that in the study period, for Bitcoin-Etrium, Bitcoin-Cardano and Bitcoin-Gold pairs model MS-CT, for Bitcoin-Binance coin and Bitcoin-Ripple pairs MS-CRG and MS-CN for Bitcoin-Oil pair have the best performance. Also the probabilities of regime change between each of the assets at each time were calculated and described.
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