Management of Foreign Reserves: An Approach Based on Vine-Copula, Regime-Switching Dependence and Bayesian Opinion Pooling

摘要: This research is constructed to address the issue of structure management for colossal foreign exchange reserves holders, such as China and other emerging economies. Contrary discussion optimal quantity on reserve level, considers ideal applications national wealth, specifically compositions in reserves' financial investments. Two perspectives are considered safety liquidity tranche reserves, another one return tranche. The thwo further developed into three chapters this thesis they form a comprehensive set analyses management. First, currency composition huge investigated. asymmetry fat-tails complex dependence distributions returns examined their vital role portfolio risk appraisal. In D-vine copula approach, it shown that under disappointment aversion effect, central bank our model can achieve sizeable gains economic value by switching from mean-variance modelling. It also found approach will lead an allows have more space international diversification, while maintaining leading position US dollar shares China’s reserves. Next, strategic asset allocation same studied using risk-based approach. Four aspects investigated: investment universe, structure, strategies minimization trade-off between risks returns. A regime-switching investigate dynamic assets. derived following two strategies: utility maximization with avoidance. If focuses solely minimization, asymmetries encourage flight safety. However, if higher allowed returns, even very conservative, would discourage Therefore, we suggest should mitigate its after 2008 increase holdings short-term deposits, long-term treasury bonds euro bonds. Finally, problem China's Sovereign Wealth Fund, Investment Corporation, examined. be reserves. Bearing responsibility pursue volume Corporation endowed capable funding position. emphasis still serious than institutional investors. new method combining merits shrinkage estimation, vine-copula Black-Litterman model, proposed tested satisfy revealed objectives. Empirical analysis suggests there market economies rather advanced when diversifying fixed-income securities; whereas reversed equities side. addition, commodity ETFs represent significance gold portfolio, discovered formidable competitor equities.