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Copulas for finance

Author

Listed:
  • Bouye, Eric
  • Durlleman, Valdo
  • Nikeghbali, Ashkan
  • Riboulet, Gaël
  • Roncalli, Thierry

Abstract

Copulas are a general tool to construct multivariate distributions and to investigate dependence structure between random variables. However, the concept of copula is not popular in Finance. In this paper, we show that copulas can be extensively used to solve many financial problems.

Suggested Citation

  • Bouye, Eric & Durlleman, Valdo & Nikeghbali, Ashkan & Riboulet, Gaël & Roncalli, Thierry, 2000. "Copulas for finance," MPRA Paper 37359, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37359
    as

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    References listed on IDEAS

    as
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    3. Peter Xue‐Kun Song, 2000. "Multivariate Dispersion Models Generated From Gaussian Copula," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 27(2), pages 305-320, June.
    4. Christian Genest & Kilani Ghoudi & Louis-Paul Rivest, 1998. "“Understanding Relationships Using Copulas,” by Edward Frees and Emiliano Valdez, January 1998," North American Actuarial Journal, Taylor & Francis Journals, vol. 2(3), pages 143-149.
    5. Anthony W. Ledford & Jonathan A. Tawn, 1997. "Modelling Dependence within Joint Tail Regions," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 59(2), pages 475-499.
    6. Cuadras, C. M., 1992. "Probability distributions with given multivariate marginals and given dependence structure," Journal of Multivariate Analysis, Elsevier, vol. 42(1), pages 51-66, July.
    7. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    8. Stuart G. Coles & Jonathan A. Tawn, 1994. "Statistical Methods for Multivariate Extremes: An Application to Structural Design," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 43(1), pages 1-31, March.
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    More about this item

    Keywords

    Copula; multivariate distribution; dependence structure; concordance measures; scoring; Markov processes; risk management; extreme value theory; stress testing; operational risk; market risk; credit risk;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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