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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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1answer
1k views

How to price this basket option?

Underlying assets are three global stock index : Eurostoxx 50, HSI, KOSPI 200 Maturity: 36 months with advanced redemption date in every 6 months if prices of indexes satisfy given conditions at each ...
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2answers
2k views

Copula models and the distribution of the sum of random variables without Monte Carlo

There is a vast literature on copula modelling. Using copulas I can describe the joint law of two (and more) random variables $X$ and $Y$, i.e. $F_{X,Y}(x,y)$. Very often in risk management (credit ...
5
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2answers
458 views

Difference between Local Vol and Copula

Let's assume we have ATM European call on a basket of two stocks and price it with: 1) Multivariate Local Vol with constant correlation 2) Gaussian copula Assuming we use the same correlation ...
2
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1answer
380 views

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 ...
2
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0answers
88 views

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-...