Accurate estimation of different risk measures for financial portfolios is of utmost importance equally for financial institutions as well as regulators, however, many existing models fail to incorporate any high dimensional dependence structures adequately. To overcome this problem and capture...

Highlights:• State-of-art review of vine copulas and stationary vine copulas.• Two types of vine copula models to capture cross-sectional and temporal dependence in ESG data.• Extreme ESG classes (i.e., classes A and D) show the highest and nonGaussian dependence to the market.• Future...

Climate change and sustainability have become societal focal points in the last decade. Consequently, companies have been increasingly characterized by non-financial information, such as environmental, social, and governance (ESG) scores, based on which companies can be grouped into ESG classes....

Measuring interdependence between probabilities of default (PDs) in different industry sectors of an economy plays a crucial role in financial stress testing. Thereby, regression approaches may be employed to model the impact of stressed industry sectors as covariates on other response sectors....