Monte Carlo Simulation by Copula to Measuring Market Risk

Monte Carlo Simulation by Copula to Measuring Market Risk


Author:Chen Shoudong, Hu Zhengyang, Kong Fanli Journal:Jilin University Journal Social Sciences Edition  Date:2006(2)

Keywords Copula;Monte Carlo simulation;value at risk

Abstract

In this paper,we adopt a new method——Copula to measure the dependence of financial data and compute the market risk.We used three different Copulas to model financial time series in empirical research and compute the VaR of portfolios.When we compared the results of different simulations which computed by Copulas and by Gaussian method,it turns out that Copula method is much better than the Gaussian one.

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