Copulas in Finance and Insurance Articles uri icon

authors

  • ROMERA AYLLON, MARIA ROSARIO
  • MOLANES LOPEZ, ELISA MARIA

publication date

  • January 2009

start page

  • 70

end page

  • 97

issue

  • 17

international standard serial number (ISSN)

  • 1697-9761

electronic international standard serial number (EISSN)

  • 1697-977X

abstract

  • Copulas provide a potential useful modeling tool to represent the dependence structure among variables and to generate joint distributions by combining given marginal distributions. Simulations play a relevant role in finance and insurance. They are used to replicate efficient frontiers or extremal values, to price options, to estimate joint risks, and so on. Using copulas, it is easy to construct and simulate from multivariate distributions based on almost any choice of marginals and any type of dependence structure. In this paper we outline recent contributions of statistical modeling using copulas in finance and insurance. We review issues related to the notion of copulas, copula families, copula-based dynamic and static dependence structure, copulas and latent factor models and simulation of copulas. Finally, we outline hot topics in copulas with a special focus on model selection and goodness-of-fit testing.