The Application of Copula Function in Portfolio Management
Li Na · Journal of Liaoning Normal University · 2006
The general routine for obtaining the value at risk in portfolio is on the assumption that the multi-assets gaining series or the combined distribution of the risk variables fit the normal distribution of multi variables;Further Var method is exerted to solve the problem.But the assumption is often runs counter to the real issue.On the other hand Copula fits the united distribution of random variables instructure well.Therefore the value at risk can be attained accurately by means of Copula function.Archimedean Copula is introduced in this paper,and its property is used in improving the Var method.The example of selecting optimal copula function is presented in this paper as well.So we could take the advantage of the improved method to evade risk safely.