De copulis non est disputandum - Copulae: An Overview

Wolfgang Karl Härdle and Ostap Okhrin

No SFB649DP2009-031, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649

Abstract: Normal distribution of the residuals is the traditional assumption in the classical multivariate time series models. Nevertheless it is not very often consistent with the real data. Copulae allows for an extension of the classical time series models to nonelliptically distributed residuals. In this paper we apply different copulae to the calculation of the static and dynamic Value-at-Risk of portfolio returns and Profit-and-Loss function. In our findings copula based multivariate model provide better results than those based on the normal distribution.

Keywords: copula; multivariate distribution; value-at-risk; multivariate dependence (search for similar items in EconPapers)
JEL-codes: C13 C14 C50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-rmg
Date: 2009-05
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