Dynamic Copula Methods in Finance

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Dynamic Copula Methods in Finance "Copulas address a central problem in financial modeling, namely how to describe the statistics of events which are related to two or more other events of interest. This important book provides a comprehensive and timely review of the theory and applications of copulas." --Robert Elliott, Haskayne School of Business, University of Calgary "Researchers and practitioners in the field of finance will welcome the appearance of Dynamic Copula Methods in Finance. In this innovative and well-written book, the authors make a strong case for the application of convolution-based copulas in finance. The book features numerous illustrations and a wealth of examples, most of which concern applications to financial problems. Dynamic Copula Methods in Finance promises to be a valuable addition to the rapidly expanding literature on copula models in finance." --Roger B. Nelsen, Professor Emeritus of Mathematics, Lewis & Clark College, Portland, Oregon "Static copula models have been extensively used in finance for more than a decade. In this book the authors show how to apply copula methods to dynamic problems, setting the ground for a number of important financial applications, from derivatives pricing to risk management." --Fabio Mercurio, Head of Quant Business Managers, Bloomberg LP, New York
The latest tools and techniques for pricing and risk management This book introduces readers to the use of copula functions to represent the dynamics of financial assets and risk factors, integrated temporal and cross-section applications. The first part of the book will briefly introduce the standard the theory of copula functions, before examining the link between copulas and Markov processes. It will then introduce new techniques to design Markov processes that are suited to represent the dynamics of market risk factors and their co-movement, providing techniques to both estimate and simulate such dynamics. The second part of the book will show readers how to apply these methods to the evaluation of pricing of multivariate derivative contracts in the equity and credit markets. It will then move on to explore the applications of joint temporal and cross-section aggregation to the problem of risk integration.

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Umberto Cherubini

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Finance & Investments Financial Engineering Finanz- u. Anlagewesen Finanztechnik

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