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Copula-Based Models for Financial Time Series

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  • Andrew J. Patton

Abstract

This paper presents an overview of the literature on applications of copulas in the modelling of financial time series. Copulas have been used both in multivariate time series analysis, where they are used to charaterise the (conditional) cross-sectional dependence between individual time series, and in univariate time series analysis, where they are used to characterise the dependence between a sequence of observations of a scalar time series process. The paper includes a broad, brief, review of the many applications of copulas in finance and economics.

Suggested Citation

  • Andrew J. Patton, 2008. "Copula-Based Models for Financial Time Series," OFRC Working Papers Series 2008fe21, Oxford Financial Research Centre.
  • Handle: RePEc:sbs:wpsefe:2008fe21
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2008fe21.pdf
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    Cited by:

    1. Vandna Jowaheer & Nafeessah Z. B. Ameerudden, 2012. "Modelling the Dependence Structure of MUR/USD and MUR/INR Exchange Rates using Copula," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 27-32.
    2. Xiaohong Chen & Wei Biao Wu & Yanping Yi, 2009. "Efficient Estimation of Copula-based Semiparametric Markov Models," Cowles Foundation Discussion Papers 1691, Cowles Foundation for Research in Economics, Yale University, revised Mar 2009.
    3. Dominique Guegan & Pierre-André Maugis, 2010. "An Econometric Study of Vine Copulas," Documents de travail du Centre d'Economie de la Sorbonne 10040, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Diks, Cees & Panchenko, Valentyn & van Dijk, Dick, 2010. "Out-of-sample comparison of copula specifications in multivariate density forecasts," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1596-1609, September.
    5. Christoffersen, Peter & Langlois, Hugues, 2013. "The Joint Dynamics of Equity Market Factors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(05), pages 1371-1404, October.
    6. Yongmin Chen & Michael H. Riordan, 2008. "Price-increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058.
    7. Cathy Q. Ning & Loran Chollete, 2009. "The Dependence Structure of Macroeconomic Variables in the US," Working Papers 005, Ryerson University, Department of Economics.
    8. Chollete, Loran & Pena, Victor de la & Lu, Ching-Chih, 2009. "International Diversification: A Copula Approach," UiS Working Papers in Economics and Finance 2009/27, University of Stavanger.
    9. Pierre-André Maugis & Dominique Guegan, 2010. "Note on new prospects on vines," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00471362, HAL.
    10. Romera, Rosario & Molanes, Elisa M., 2008. "Copulas in finance and insurance," DES - Working Papers. Statistics and Econometrics. WS ws086321, Universidad Carlos III de Madrid. Departamento de Estadística.
    11. Leonidas Tsiaras, 2010. "Dynamic Models of Exchange Rate Dependence Using Option Prices and Historical Returns," CREATES Research Papers 2010-35, Department of Economics and Business Economics, Aarhus University.
    12. Chollete, Loran & de la Pena , Victor & Lu, Ching-Chih, 2009. "International Diversification: An Extreme Value Approach," UiS Working Papers in Economics and Finance 2009/26, University of Stavanger.

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