Investment portfolio risk modelling based on hierarchical copulas

Henry Penikas

Applied Econometrics, 2014, vol. 35, issue 3, 18-38

Abstract: Paper is devoted to comparison of various copula models application to investment portfolio risk measurement. Elliptical, Archimedean and hierarchical copulas are considered in the research. The analysis undertaken has shown that hierarchical Clayton model enables to evaluate investment portfolio risks more precisely given the criteria of risk measures such as expected shortfall (ES) and Value-at-Risk (VaR). Statistically justified approach to hierarchical copula definition is also proposed.

Keywords: copula; hierarchical copula; tail dependence; expected shortfall (ES); Value-at-Risk (VaR) (search for similar items in EconPapers)
JEL-codes: C58 G10 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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