Perturbed Gaussian copula: introducing the skew effect in co-dependence

Gaussian copula models are often used in the industry when single-asset information is quoted but little is known about their joint relation. These models may arise from correlated stochastic Brownian processes with deterministic volatility and correlation. If stochastic volatility is introduced, skewness and fat tails can be included in the co-dependence but analytic tractability is lost. Alberto Elices and Jean-Pierre Fouque show how this analytic tractability is preserved through another copula derived from an asymptotic expansion of the correlated processes with stochastic volatility around the Gaussian copula case

Copula models arise in the market when quoted information about the behaviour of single assets is available but very little is known about their joint relations. Information about the joint distribution of assets is captured in the prices of basket products written on them. However, as a lot of information is embedded in a single price, some assumptions have to be made about the form of the distribution in order to extract it.

Perturbed Gaussian copula: introducing the skew effect in co

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here