Contagion tests via copula threshold models, mimeo

We develop threshold models that allow copula functions or their association parame-ters changing across time. The number and location of thresholds is assumed unknown. We use a Markov chain Monte Carlo strategy combined with Laplace estimates that eval-uate the required marginal densities for a given model. We apply our methodology to financial time series emphasizing the ability to improve estimates of risk characteristics, as well as measuring financial contagion by inspecting changing dependence structures