It has been empirically verified that the strength of dependence in stock markets usually rises with volatility. In this paper we exploit this stylized fact combined with local maximum likelihood estimation of copula models to analyze the dynamic joint behavior of series of financial log...

Portfolio selection requires an estimate of the degree of association between assets. The Pearson correlation coefficient ρ is the most common measure and estimates the linear correlation implied by the underlying bivariate distribution. Correlations typically rise during stressful times and...