A new copula for modeling portfolios with skewed, leptokurtic and high-order dependent risk factors

Piero Quatto, Gianmarco Vacca and Maria Zoia

The North American Journal of Economics and Finance, 2021, vol. 58, issue C

Abstract: The paper proposes a new copula for modeling higher-order dependencies between pairs of portfolio assets, employing orthogonal polynomials to model symmetric co-kurtoses. Skewness and leptokurtosis of portfolio margins are modeled either with the Gram–Charlier expansion of the Normal distribution or Gram–Charlier-like expansions of leptokurtic laws. Details on the estimation method of this copula are provided, and a simulation study is carried out to assess its potential range of applicability with respect to widely employed alternatives in the copula literature. Empirical evidence of the suitability of this approach to model financial data and compute risk measures is provided.

Keywords: Copula; Co-kurtosis; Gram–Charlier expansion; GARCH; Risk measures (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940821001443
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001443

DOI: 10.1016/j.najef.2021.101529

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().