A Versatile Copula and Its Application to Risk Measures

Jeungbo Shim, Eun-Joo Lee and Seung-Hwan Lee
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Jeungbo Shim: Department of Business Administration, Illinois Wesleyan University, U.S.A.
Eun-Joo Lee: Department of Mathematics, Millikin University, U.S.A.
Seung-Hwan Lee: Department of Mathematics and Computer Science, Illinois Wesleyan University, U.S.A.

International Journal of Business and Economics, 2010, vol. 9, issue 3, 213-231

Abstract: This paper proposes a copula that has versatile properties. We apply grouped t and versatile t copulas to estimate Value at Risk and expected shortfall using a sample of firms in the US property-liability insurance industry. We perform goodness-of-fit tests to assess the adequacy of the copula models selected. We find that a versatile copula is effective in estimating dependence structures of non-homogeneous multivariate risks.

Keywords: dependence structure; versatility; grouped t copula; value at risk (search for similar items in EconPapers)
JEL-codes: C00 C13 (search for similar items in EconPapers)
Date: 2010
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