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A note on the large homogeneous portfolio approximation with the Student-t copula

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  • Lutz Schloegl
  • Dominic O’Kane

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    Abstract

    We extend the Large Homogeneous Portfolio (LHP) approximation to the case of the Student-t copula, and provide analytic formulae for the density and the cdf of the portfolio loss distribution. We compare the Value-at-Risk implied by the Student-t copula to that obtained using the Gaussian as well as two prominent members of the Archimedean family, namely the Clayton and the Gumbel copulae. Copyright Springer-Verlag Berlin/Heidelberg 2005

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    File URL: http://hdl.handle.net/10.1007/s00780-004-0142-7
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    Bibliographic Info

    Article provided by Springer in its journal Finance and Stochastics.

    Volume (Year): 9 (2005)
    Issue (Month): 4 (October)
    Pages: 577-584

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    Handle: RePEc:spr:finsto:v:9:y:2005:i:4:p:577-584

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    Web page: http://www.springerlink.com/content/101164/

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    Related research

    Keywords: Large portfolios; Student-t distribution; copula functions;

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    Cited by:
    1. Ascheberg, Marius & Bick, Björn & Kraft, Holger, 2013. "Hedging structured credit products during the credit crisis: A horse race of 10 models," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1687-1705.
    2. Konstantinos Spiliopoulos, 2014. "Systemic Risk and Default Clustering for Large Financial Systems," Papers 1402.5352, arXiv.org.
    3. Lee, Yongwoong & Poon, Ser-Huang, 2014. "Forecasting and decomposition of portfolio credit risk using macroeconomic and frailty factors," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 69-92.

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