# Questions tagged [dependence]

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### Applications of distance correlation

This question mentions distance correlation. Where has this concept been applied to financial data and provided new insight? Do you know any examples or references?
37 views

Gijbels et. al. Positive quadrant dependence tests for copulas (25 page PDF) What could potentially be application of this concept in economics and finance? From what I read from a couple of papers, ...
69 views

### Alternatives to Elliptical and Archimedean copulas for modelling dependency structure between stocks

Except from the well-know and well-documented Elliptical (i.e. Gaussian, Student-t) and Archimedean (i.e. Frank, Clayton, Gumbel) copulas used to model the dependency structure between stock returns, ...
866 views

### What is the most stable, non-trivial dependence structure in finance?

The highest rated answer to the question on What concepts are the most dangerous ones in quantitative finance work? is this one: Correlation Correlations are notoriously unstable in ...
204 views

### Double knockout binary pricing?

I'm studying the pricing of a Double-Barrier binary option on the price of $S$. By this I mean an option that pays $X$ at maturity $T$ if the lower ($H1$) or upper barriers ($H2$) are not hit during ...
464 views

### tail dependency for portfolio optimization

This question pops up in my head every few weeks and I'm struggling to really understand the concept / theory behind it. We all know there are different kind of measures of dependencies out there. ...
128 views

### Estimating time-varying tail dependence for Archimedean copulas

Patton (2006) defines the upper tail dependence coefficient for a time-varying bivariate SJC copula as \tau^u_t=\Lambda \left(\omega_u + \beta_u \tau^u_{t-1}+\alpha_u \frac{1}{10}\sum^{10}_{i=1}|u_{...
17k views

### Copulas simply explained

I try to understand the basic idea of copulas, however I am still struggling and hope that someone can help me. I understood that in general a copula is a function which links several marginal ...
821 views

### Alternative ways to understand time-varying comovement between two time-series?

I have been looking into ways to better understand how the dependencies/correlations/etc between two time series can vary over time. I first thought about using a Kalman/particle filter over a ...
2k views

### Is there a copula that can estimate negative tail dependence?

I have encountered numerous copula estimators that can estimate time-invariant and time-varying linear and non-linear correlations on the interval $[-1,1]$, and these estimators are fully consistent ...