Extreme risk dependence between green bonds and financial markets

The current study investigates the extreme risk dependence between green bonds and financial markets by employing the dual approaches of time-varying optimal copula and extreme risk spillover analysis of dynamic conditional Value-at-Risk. We report significant symmetric (asymmetric) tail-dependent copulas in the upper (lower) tails characterizing independent regimes. Green bonds offer sufficient diversification, safe-haven, and hedging opportunities during stable and distressing times to financial markets. The extreme risk spillovers revealed that COVID-19 transformed the spillovers between green bonds and financial markets except Bitcoin. We proposed insightful implications for policymakers, governments, investors, and portfolio managers to relish the findings for their investment avenues.