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Dynamic Copula Methods in Finance

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ISBN-10: 0470683074

ISBN-13: 9780470683071

Edition: 2011

Authors: Umberto Cherubini, Fabio Gobbi, Sabrina Mulinacci, Silvia Romagnoli

List price: $70.00
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Description:

Copula functions are a very popular tool for applications in finance. However, most of these applications (and all of them as far as pricing and risk management are concerned), are referred to cross-section dynamics (what is called spatial dependence in statistics). Standard examples are the evaluation of multivariate equity and credit derivatives, and aggregation of Value-at-Risk figures on different risk factors over a common investment horizon period. This book will introduce 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 which is paramount in risk management. Like Copula Methods in Finance, this book is a first in bringing the latest tools and techniques for pricing and risk management to the practitioner.
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Book details

List price: $70.00
Copyright year: 2011
Publisher: John Wiley & Sons, Limited
Publication date: 10/28/2011
Binding: Hardcover
Pages: 288
Size: 7.00" wide x 9.75" long x 0.75" tall
Weight: 1.408
Language: English

Preface
Correlation Risk in Finance
Correlation Risk in Pricing and Risk Management
Implied vs Realized Correlation
Bottom-up vs Top-down Models
Copula Functions
Spatial and Temporal Dependence
Long-range Dependence
Multivariate GARCH Models
Copulas and Convolution
Copula Functions: The State of the Art
Copula Functions: The Basic Recipe
Market Co-movements
Delta Hedging Multivariate Digital Products
Linear Correlation
Rank Correlation
Multivariate Spearman's Rho
Survival Copulas and Radial Symmetry
Copula Volume and Survival Copulas
Tail Dependence
Long/Short Correlation
Families of Copulas
Elliptical Copulas
Archimedean Copulas
Kendall Function
Exchangeability
Hierarchical Copulas
Conditional Probability and Factor Copulas
Copula Density and Vine Copulas
Dynamic Copulas
Conditional Copulas
Pseudo-copulas
Copula Functions and Asset Price Dynamics
The Dynamics of Speculative Prices
Copulas and Markov Processes: The DNO approach
The * and <sub>*</sub> Product Operators
Product Operators and Markov Processes
Self-similar Copulas
Simulating Markov Chains with Copulas
Time-changed Brownian Copulas
CEV Clock Brownian Copulas
VG Clock Brownian Copulas
Copulas and Martingale Processes
C-Convolution
Markov Processes with Independent Increments
Markov Processes with Dependent Increments
Extracting Dependent Increments in Markov Processes
Martingale Processes
Multivariate Processes
Multivariate Markov Processes
Granger Causality and the Martingale Condition
Copula-based Econometrics of Dynamic Processes
Dynamic Copula Quantile Regressions
Copula-based Markov Processes: Non-linear Quantile Autoregression
Copula-based Markov Processes: Semi-parametric Estimation
Copula-based Markov Processes: Non-parametric Estimation
Copula-based Markov Processes: Mixing Properties
Persistence and Long Memory
C-convolution-based Markov Processes: The Likelihood Function
Multivariate Equity Products
Multivariate Equity Products
European Multivariate Equity Derivatives
Path-dependent Equity Derivatives
Recursions of Running Maxima and Minima
The Memory Feature
Risk-neutral Pricing Restrictions
Time-changed Brownian Copulas
Variance Swaps
Semi-parametric Pricing of Path-dependent Derivatives
The Multivariate Pricing Setting
H-Condition and Granger Causality
Multivariate Pricing Recursion
Hedging Multivariate Equity Derivatives
Correlation Swaps
The Term Structure of Multivariate Equity Derivatives
Altiplanos
Everest
Spread Options
Multivariate Credit Products
Credit Transfer Finance
Univariate Credit Transfer Products
Multivariate Credit Transfer Products
Credit Information: Equity vs CDS
Structural Models
Univariate Model: Credit Risk as a Put Option
Multivariate Model: Gaussian Copula
Large Portfolio Model: Vasicek Formula
Intensity-based Models
Univariate Model: Poisson and Cox Processes
Multivariate Model: Marshall-Olkin Copula
Homogeneous Model: Cuadras Aug� Copula
Frailty Models
Multivariate Model: Archimedean Copulas
Large Portfolio Model: Sch�nbucher Formula
Granularity Adjustment
Credit Portfolio Analysis
Semi-unsupervised Cluster Analysis: K-means
Unsupervised Cluster Analysis: Kohonen Self-organizing Maps
(Semi-)unsupervised Cluster Analysis: Hierarchical Correlation Model
Dynamic Analysis of Credit Risk Portfolios
Risk Capital Management
A Review of Value-at-Risk and Other Measures
Capital Aggregation and Allocation
Aggregation: C-Convolution
Allocation: Level Curves
Allocation with Constraints
Risk Measurement of Managed Portfolios
Henriksson-Merton Model
Semi-parametric Analysis of Managed Funds
Market-neutral Investments
Temporal Aggregation of Risk Measures
The Square-root Formula
Temporal Aggregation by C-convolution
Frontier Issues
L'evy Copulas
Pareto Copulas
Semi-martingale Copulas
A Elements of Probability
Elements of Measure Theory
Integration
Expected Values and Moments
The Moment-generating Function or Laplace Transform
The Characteristic Function
Relevant Probability Distributions
Random Vectors and Multivariate Distributions
The Multivariate Normal Distribution
Infinite Divisibility
Convergence of Sequences of Random Variables
The Strong Law of Large Numbers
The Radon-Nikodym Derivative
Conditional Expectation
Elements of Stochastic Processes Theory
Stochastic Processes
Filtrations
Stopping Times
Martingales
Markov Processes
L�vy Processes
Subordinators
Semi-martingales
References
Extra Reading
Index