# Questions tagged [copula]

A copula is a multivariate distribution with uniform marginal distributions. Copulas are mostly used to represent/model the structure of dependence between random variables, separately from the margins.

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### What is the R code for estimating copula parameters of BB1 with dim=2? And what's the code for gof test of BB1?

Kindly assist with R code for BB1 copula. Text books and research articles provide codes for clayton, gumbel, frank, normal and t copulas. However, I can't find code for BB1. For example, this is ...
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### Wrong way risk Gaussian copula

I'm studying Wrong Way Risk. To calculate the conditional expected exposure on default I have this formula \begin{equation} EE_{conditional} (t) = E[Weight(t) P(0,t)max(V(t),0)] \end{equation} where ...
170 views

### Why do we not use copula for forward starting options?

Why do we use copulas for spread options but do not use them to correlate random variables across time, such as in the forward starting option?
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### Joint Distribution of Correlated Variables with Markov Switching

I am modeling a portfolio of correlated assets whose lack of liquidity can be reasonably described by a Markov-switching model. That is, not only is movement size among assets correlated, but so is ...
74 views

### Historical quotes / prices of multiasset options

I am working on Lévy copulas, and I would like to try calibrating such techniques on real data. Where can I find quotes for multi-asset options? It could be exchange options or any other type of ...
37 views

### Advantage of copula over estimation based on historical data

It seems to me hard to intuitively understand the concept of copulas and their advantages. For example, why would it be better to estimate value at risk of portfolio by modelling its asset returns ...
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### Specify user-defined distribution for multivariate distribution in copula R package

For the copula R package, the function Mvdc allows the margins to be user-defined. ...
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### Patton Copula model code and significance of parameters

I am trying to implement a copula model using the Patton (2006) Matlab code. I am unable to determine the significance of the parameters. Does anyone know how i can generate the standard errors from ...
390 views

### Simulating from a multivariate clayton copula

I am recently into copulas for finance, I've read several examples of how to generate dependent random variables with most kind of copulas. The problem for me is that all the books describe the case ...
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### How to sample from a copula in matlab

I have two random variables (say, X and Y). Each of these rv's are defined by their CDFs (CDF_X and CDF_Y). These CDFs were obtained empirically, so they are a "stair" graph. I also have a copula C ...
650 views

### (Reproducible example) Conditional returns in GARCH-EVT-Copula context (with R)

I'm estimating a time-varying correlation matrix for the normal copula using the rmgarch package from R. I've found this code in the rmgarch.tests folder. I use the ...
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### Portofolio optimization using ARMA-GARCH-EVT-Copula

I am currently trying to do some portfolio optimization by reproducing the methodology found in Sahamkhadam, Stephan & Östermark (2018) ("Portfolio optimization based on GARCH-EVT-Copula ...
736 views

### Forecasting conditional returns in DCC-GARCH-copula approach in R

anyone who could help me interpreting and modifying this code? I have a dataset and want to reserve the last 100 returns for out-of-sample analysis. After specifying and fitting the garch-spd-copula, ...
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### Problem in copula fitting

I have returns of 2 stocks: stock1 and stock2. And I want to fit pair copula. I use this libraries library(VineCopula) library(copula) then I select an ...
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### Convolution of Dependent Random Variables with Copulas

Lets say I have 2 different observations which are fitted to a parametric distribution. And lets say that they are dependent and can be modeled by one of the copulas. I want to calculate “a value” ...
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### Practical Use of Copulas and Sample Generation

I'm currently studying Copulas. However, i did not understand something. The very basic phases of Copula fitting is as follows i assume; Model each samples distribution with a parametric(or non-...
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### Fitting Copula and Simulation

I would greatly appreciate any insights into the problem described below, regarding using the data obtained from applying the functions of the rugarch package ...
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### Metric for measuring the “spread” of a copula

I am fitting copula to log returns data for my undergraduate thesis, and comparing the quality of the fit with AIC. One interesting thing that I found is that the Clayton copula, which has negative ...
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### Using variance reduction on only some models

I am pricing options with some copula based models using Monte Carlo simulation. I was looking up some easily implementable variance reduction methods and decided on antithetic variates. However, ...
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### Verifying two properties of the Clayton Copula

So I'm trying to verify the first two properties of a copula for the Clayton model. The first two properties being: $C(u_1,…,u_d)$ is non-decreasing in each component, $u_i$ The $i^{th}$ marginal ...
It seems that the sample linear correlation coefficient $\hat{\rho}$ of samples generated by a copula that is parametrized by $\rho$ is unequal to $\rho$. For example, I construct a Normal copula with ...