Bernstein Approximations to the Copula Function and Portfolio Optimization
AbstractThe copula function is considered within the context of financial multivariate data sets that are not normally distributed. The Bernstein polynomial approximation to copulae is given and motivated by its desirable properties. The multivariate convergence properties are analysed. The concept of Bernstein copula is introduced as a generalisation of some bivariate and higher dimensional families of copulae. Statistical properties of the Bernstein copula are studied together with implementation issues related to portfolio theory and expected utility optimisation.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0105.
Date of creation: Jun 2001
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copulae; Bernstein polynomials; approximation theory; portfolio;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
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