Download or read book Archimedean Copula Based Models in Financial Risk Management written by Qing Xu and published by LAP Lambert Academic Publishing. This book was released on 2009-06-14 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: Copula is used to model multivariate data, as it accounts for the dependence structure and provides a flexible representation of the multivariate distribution. Recently a large number of Archimedean copulas have been proposed to deal with various dependence aspects in financial risk management, which invokes several new questions in some important yet under-researched areas.This dissertation comprises three essays and probes into three untouched questions all involving the Archimedean-copula-based models. It provides important empirical evidences that the Archimedean copula-based PVaR model generally has better forecasting performance than the Gaussian copula-based PVaR model. Therefore, financial risk managers should consider the use of the Archimedean copula-based PVaR model when attempting to forecast extreme downside dependent risk.

Download or read book Estimating and Evaluating the Archimedean copula based Models in Financial Risk Management written by Qing Xu and published by . This book was released on 2008 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Engineering with Copulas Explained written by J. Mai and published by Springer. This book was released on 2014-10-02 with total page 167 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a succinct guide to the application and modelling of dependence models or copulas in the financial markets. First applied to credit risk modelling, copulas are now widely used across a range of derivatives transactions, asset pricing techniques and risk models and are a core part of the financial engineer's toolkit.

Download or read book Handbook of Financial Time Series written by Torben Gustav Andersen and published by Springer Science & Business Media. This book was released on 2009-04-21 with total page 1045 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.

Download or read book Contributions to Static and Time varying Copula based Modeling of Multivariate Association written by Martin Ruppert and published by BoD – Books on Demand. This book was released on 2012 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: Putting a particular emphasis on nonparametric methods that rely on modern empirical process techniques, the author contributes to the theory of static and time-varying stochastic models for multivariate association based on the concept of copulas. These functions enable a profound understanding of multivariate association, which is pivotal for judging whether a large set of risky assets entails diversification effects or aggravates risk from an entrepreneurial point of view. Since serial dependence is a stylized fact of financial time series, an asymptotic theory for estimating the structure of association in this context is developed under weak assumptions. A new measure of multivariate association, based on a notion of distance to stochastic independence, is introduced. Asymptotic results as well as hypothesis tests are established which are directly applicable to important types of multivariate financial time series. To ensure that risk management properly captures the current structure of association, it is crucial to assess the constancy of the structure. Therefore, nonparametric tests for a constant copula with either a specified or unspecified change point (candidate) are derived. The thesis concludes with a study of characterizations of association between non-continuous random variables.

Download or read book Copulas written by Jörn Rank and published by Bloomberg Press. This book was released on 2007 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of copulas becoming increasingly important in finance. This book provides a varied perspective of their usage within the field of financial risk management and derivative pricing. It involves a detailed analysis of the field of financial risk management and derivative pricing, and delves into the theoretical aspects.

Download or read book Dynamic Copula Methods in Finance written by Umberto Cherubini and published by John Wiley & Sons. This book was released on 2011-10-20 with total page 287 pages. Available in PDF, EPUB and Kindle. Book excerpt: The latest tools and techniques for pricing and risk management This book introduces readers to the use of copula functions to represent the dynamics of financial assets and risk factors, integrated temporal and cross-section applications. The first part of the book will briefly introduce the standard the theory of copula functions, before examining the link between copulas and Markov processes. It will then introduce new techniques to design Markov processes that are suited to represent the dynamics of market risk factors and their co-movement, providing techniques to both estimate and simulate such dynamics. The second part of the book will show readers how to apply these methods to the evaluation of pricing of multivariate derivative contracts in the equity and credit markets. It will then move on to explore the applications of joint temporal and cross-section aggregation to the problem of risk integration.

Download or read book Econometrics and Risk Management written by Thomas B. Fomby and published by Emerald Group Publishing. This book was released on 2008-12-01 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: Covers credit risk and credit derivatives. This book offers several points of view on credit risk when looked at from the perspective of Econometrics and Financial Mathematics. It addresses the challenge of modeling defaults and their correlations, and results on copula, reduced form and structural models, and the top-down approach.

Download or read book Multivariate GARCH and Dynamic Copula Models for Financial Time Series written by Martin Grziska and published by Pro BUSINESS. This book was released on 2015-02-05 with total page 191 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis presents several non-parametric and parametric models for estimating dynamic dependence between financial time series and evaluates their ability to precisely estimate risk measures. Furthermore, the different dependence models are used to analyze the integration of emerging markets into the world economy. In order to analyze numerous dependence structures and to discover possible asymmetries, two distinct model classes are investigated: the multivariate GARCH and Copula models. On the theoretical side a new dynamic dependence structure for multivariate Archimedean Copulas is introduced which lifts the prevailing restriction to two dimensions and extends the multivariate dynamic Archimedean Copulas to more than two dimensions. On this basis a new mixture copula is presented using the newly invented multivariate dynamic dependence structure for the Archimedean Copulas and mixing it with multivariate elliptical copulas. Simultaneously a new process for modeling the time-varying weights of the mixture copula is introduced: this specification makes it possible to estimate various dependence structures within a single model. The empirical analysis of different portfolios shows that all equity portfolios and the bond portfolios of the emerging markets exhibit negative asymmetries, i.e. increasing dependence during market downturns. However, the portfolio consisting of the developed market bonds does not show any negative asymmetries. Overall, the analysis of the risk measures reveals that parametric models display portfolio risk more precisely than non-parametric models. However, no single parametric model dominates all other models for all portfolios and risk measures. The investigation of dependence between equity and bond portfolios of developed countries, proprietary, and secondary emerging markets reveals that secondary emerging markets are less integrated into the world economy than proprietary. Thus, secondary emerging markets are moresuitable to diversify a portfolio consisting of developed equity or bond indices than proprietary.

Download or read book Innovations in Quantitative Risk Management written by Kathrin Glau and published by Springer. This book was released on 2015-01-09 with total page 434 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quantitative models are omnipresent –but often controversially discussed– in todays risk management practice. New regulations, innovative financial products, and advances in valuation techniques provide a continuous flow of challenging problems for financial engineers and risk managers alike. Designing a sound stochastic model requires finding a careful balance between parsimonious model assumptions, mathematical viability, and interpretability of the output. Moreover, data requirements and the end-user training are to be considered as well. The KPMG Center of Excellence in Risk Management conference Risk Management Reloaded and this proceedings volume contribute to bridging the gap between academia –providing methodological advances– and practice –having a firm understanding of the economic conditions in which a given model is used. Discussed fields of application range from asset management, credit risk, and energy to risk management issues in insurance. Methodologically, dependence modeling, multiple-curve interest rate-models, and model risk are addressed. Finally, regulatory developments and possible limits of mathematical modeling are discussed.

Download or read book Copulae and Multivariate Probability Distributions in Finance written by Alexandra Dias and published by Routledge. This book was released on 2013-08-21 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Portfolio theory and much of asset pricing, as well as many empirical applications, depend on the use of multivariate probability distributions to describe asset returns. Traditionally, this has meant the multivariate normal (or Gaussian) distribution. More recently, theoretical and empirical work in financial economics has employed the multivariate Student (and other) distributions which are members of the elliptically symmetric class. There is also a growing body of work which is based on skew-elliptical distributions. These probability models all exhibit the property that the marginal distributions differ only by location and scale parameters or are restrictive in other respects. Very often, such models are not supported by the empirical evidence that the marginal distributions of asset returns can differ markedly. Copula theory is a branch of statistics which provides powerful methods to overcome these shortcomings. This book provides a synthesis of the latest research in the area of copulae as applied to finance and related subjects such as insurance. Multivariate non-Gaussian dependence is a fact of life for many problems in financial econometrics. This book describes the state of the art in tools required to deal with these observed features of financial data. This book was originally published as a special issue of the European Journal of Finance.

Download or read book Actuarial Theory for Dependent Risks written by Michel Denuit and published by John Wiley & Sons. This book was released on 2006-05-01 with total page 458 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increasing complexity of insurance and reinsurance products has seen a growing interest amongst actuaries in the modelling of dependent risks. For efficient risk management, actuaries need to be able to answer fundamental questions such as: Is the correlation structure dangerous? And, if yes, to what extent? Therefore tools to quantify, compare, and model the strength of dependence between different risks are vital. Combining coverage of stochastic order and risk measure theories with the basics of risk management and stochastic dependence, this book provides an essential guide to managing modern financial risk. * Describes how to model risks in incomplete markets, emphasising insurance risks. * Explains how to measure and compare the danger of risks, model their interactions, and measure the strength of their association. * Examines the type of dependence induced by GLM-based credibility models, the bounds on functions of dependent risks, and probabilistic distances between actuarial models. * Detailed presentation of risk measures, stochastic orderings, copula models, dependence concepts and dependence orderings. * Includes numerous exercises allowing a cementing of the concepts by all levels of readers. * Solutions to tasks as well as further examples and exercises can be found on a supporting website. An invaluable reference for both academics and practitioners alike, Actuarial Theory for Dependent Risks will appeal to all those eager to master the up-to-date modelling tools for dependent risks. The inclusion of exercises and practical examples makes the book suitable for advanced courses on risk management in incomplete markets. Traders looking for practical advice on insurance markets will also find much of interest.

Download or read book Fundamental Aspects of Operational Risk and Insurance Analytics written by Marcelo G. Cruz and published by John Wiley & Sons. This book was released on 2015-01-29 with total page 939 pages. Available in PDF, EPUB and Kindle. Book excerpt: A one-stop guide for the theories, applications, and statistical methodologies essential to operational risk Providing a complete overview of operational risk modeling and relevant insurance analytics, Fundamental Aspects of Operational Risk and Insurance Analytics: A Handbook of Operational Risk offers a systematic approach that covers the wide range of topics in this area. Written by a team of leading experts in the field, the handbook presents detailed coverage of the theories, applications, and models inherent in any discussion of the fundamentals of operational risk, with a primary focus on Basel II/III regulation, modeling dependence, estimation of risk models, and modeling the data elements. Fundamental Aspects of Operational Risk and Insurance Analytics: A Handbook of Operational Risk begins with coverage on the four data elements used in operational risk framework as well as processing risk taxonomy. The book then goes further in-depth into the key topics in operational risk measurement and insurance, for example diverse methods to estimate frequency and severity models. Finally, the book ends with sections on specific topics, such as scenario analysis; multifactor modeling; and dependence modeling. A unique companion with Advances in Heavy Tailed Risk Modeling: A Handbook of Operational Risk, the handbook also features: Discussions on internal loss data and key risk indicators, which are both fundamental for developing a risk-sensitive framework Guidelines for how operational risk can be inserted into a firm’s strategic decisions A model for stress tests of operational risk under the United States Comprehensive Capital Analysis and Review (CCAR) program A valuable reference for financial engineers, quantitative analysts, risk managers, and large-scale consultancy groups advising banks on their internal systems, the handbook is also useful for academics teaching postgraduate courses on the methodology of operational risk.

Download or read book Hierarchical Archimedean Copulas written by Jan Górecki and published by Springer Nature. This book was released on with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Understanding and Managing Model Risk written by Massimo Morini and published by John Wiley & Sons. This book was released on 2011-10-20 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: A guide to the validation and risk management of quantitative models used for pricing and hedging Whereas the majority of quantitative finance books focus on mathematics and risk management books focus on regulatory aspects, this book addresses the elements missed by this literature--the risks of the models themselves. This book starts from regulatory issues, but translates them into practical suggestions to reduce the likelihood of model losses, basing model risk and validation on market experience and on a wide range of real-world examples, with a high level of detail and precise operative indications.

Download or read book Copulae in Mathematical and Quantitative Finance written by Piotr Jaworski and published by Springer Science & Business Media. This book was released on 2013-06-18 with total page 299 pages. Available in PDF, EPUB and Kindle. Book excerpt: Copulas are mathematical objects that fully capture the dependence structure among random variables and hence offer great flexibility in building multivariate stochastic models. Since their introduction in the early 1950s, copulas have gained considerable popularity in several fields of applied mathematics, especially finance and insurance. Today, copulas represent a well-recognized tool for market and credit models, aggregation of risks, and portfolio selection. Historically, the Gaussian copula model has been one of the most common models in credit risk. However, the recent financial crisis has underlined its limitations and drawbacks. In fact, despite their simplicity, Gaussian copula models severely underestimate the risk of the occurrence of joint extreme events. Recent theoretical investigations have put new tools for detecting and estimating dependence and risk (like tail dependence, time-varying models, etc) in the spotlight. All such investigations need to be further developed and promoted, a goal this book pursues. The book includes surveys that provide an up-to-date account of essential aspects of copula models in quantitative finance, as well as the extended versions of talks selected from papers presented at the workshop in Cracow.

Download or read book Selecting Copulas for Risk Management written by Erik Kole and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Copulas offer financial risk managers a powerful tool to model the dependence between the different elements of a portfolio and are preferable to the traditional, correlation-based approach. In this paper, we show the importance of selecting an accurate copula for risk management. We extend standard goodness-of-fit tests to copulas. Contrary to existing, indirect tests, these tests can be applied to any copula of any dimension and are based on a direct comparison of a given copula with observed data. For a portfolio consisting of stocks, bonds and real estate, these tests provide clear evidence in favor of the Student's t copula, and reject both the correlation-based Gaussian copula and the extreme value-based Gumbel copula. In comparison with the Student's t copula, we find that the Gaussian copula underestimates the probability of joint extreme downward movements, while the Gumbel copula overestimates this risk. Similarly we establish that the Gaussian copula is too optimistic on diversification benefits, while the Gumbel copula is too pessimistic. Moreover, these differences are significant.