Copulas and bivariate risk measures : an application to hedge funds
With hedge funds, managers develop risk management models that mainly aim to play on the effect of decorrelation. In order to achieve this goal , companies use the correlation coefficient as an indicator for measuring dependencies existing between (i) the various hedge funds strategies and share index returns and (ii) hedge funds strategies against each other. Otherwise, copulas are a statistic tool to model the dependence in a realistic and less restrictive way, taking better account of the stylized facts in finance. This paper is a practical implementation of the copulas theory to model dependence between different hedge fund strategies and share index returns and between these strategies in relation to each other on a "normal" period and a period during which the market trend is downward. Our approach based on copulas allows us to determine the bivariate VaR level curves and to study extremal dependence between hedge funds strategies and share index returns through the use of some tail dependence measures which can be made into useful portfolio management tools.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://economix.fr
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2009-19. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valérie Mignon)
If references are entirely missing, you can add them using this form.