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Modeling the Dependence of Losses of a Financial Portfolio Using Nested Archimedean Copulas

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  • Wendkouni Yaméogo
  • Diakarya Barro
  • Niansheng Tang

Abstract

In financial analysis, stochastic models are more and more used to estimate potential outcomes in a risky framework. This paper proposes an approach of modeling the dependence of losses on securities, and the potential loss of the portfolio is divided into sectors each including two subsectors. The Weibull model is used to describe the stochastic behavior of the default time while a nested class of Archimedean copulas at three levels is used to model the maximum of the value at risk of the portfolio.

Suggested Citation

  • Wendkouni Yaméogo & Diakarya Barro & Niansheng Tang, 2021. "Modeling the Dependence of Losses of a Financial Portfolio Using Nested Archimedean Copulas," International Journal of Mathematics and Mathematical Sciences, Hindawi, vol. 2021, pages 1-14, July.
    • Handle: RePEc:hin:jijmms:4651044
    DOI: 10.1155/2021/4651044
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    Cited by:

    1. Christian Bucio-Pacheco & Miriam Sosa-Castro & Francisco Reyes-Zarate, 2023. "Volatilidad dinamica en el sector bancario en Mexico: evidencia DCC-GARCH vs Copula-GARCH," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 20(2), pages 69-93, Julio-Dic.
    2. Ferreira, João J. & Gomes, Sofia & Lopes, João M. & Zhang, Justin Z., 2023. "Ticking time bombs: The MENA and SSA regions' geopolitical risks," Resources Policy, Elsevier, vol. 85(PA).

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