Research on Volatility Spillover Effects in Financial Markets Based on Copula and Kernel Function

In the current international financial crisis, investors are closely watching that how deeply China´s market is affected by the financial crisis and its role in stabilizing the global financial situation. In this paper, we have tested spillover effects in financial risk between the Shanghai market and the other main stock markets. We use the kernel smoothing function to estimate the marginal density distribution, and use the bivariate Archimedean Copula to estimate the asymmetrical distribution. The main findings are that Shanghai market is not significantly affected by New York market, and that it cannot exert on significant influence on New York market.