Extreme contagion in emerging stock markets using extreme value copulas

This paper uses multivariate extreme value theory to model the tail dependence as a measure of extreme contagion in emerging stock markets. Using the extreme value copulas, we determine the joint probabilities of simultaneous crashes between two emerging markets. The study is performed on a number of East-Asian emerging markets that have lived the well-known Asian flu. The results revealed the existence of a high contagion of crisis in the Asian emerging markets with a continuous high risk dependence structure in the aftermath of the Asian flu.