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We introduce a general approach to nonlinear quantile regression modelling based on the copula function that defines the dependency structure between the variables of interest. Hence we extend Koenker and Bassett's [1978] original statement of the quantile regression problem by determining a...
Persistent link: https://www.econbiz.de/10012724430
A general methodology for time series modelling is developed which works down from distributional properties to implied structural models including the standard regression relationship. This general to specific approach is important since it can avoid spurious assumptions such as linearity in...
Persistent link: https://www.econbiz.de/10012723072
This paper aims to provide an introductory review of copulae and their potential application finance, in particular in capturing the dependence between financial assets that follow non-gaussian distributions and hence for modelling credit risk, pricing options and portfolio design. We briefy...
Persistent link: https://www.econbiz.de/10012723075
We model the joint risk-neutral distribution of the euro-sterling and the dollar-sterling exchange rates using option-implied marginal distributions that are connected via a copula function that satisfies the triangular no-arbitrage condition. We then derive a univariate distribution for a...
Persistent link: https://www.econbiz.de/10012727482
This paper examines the predictability of exchange rates on a transaction level basis using both past transaction prices and the structure of the order book. In contrast to the existing literature we also recognise that the trader may be subject to (Knightian) uncertainty as opposed to risk...
Persistent link: https://www.econbiz.de/10012706139
Copulas are a general tool to construct multivariate distributions and to investigate dependence structure between random variables. However, the concept of copula is not popular in Finance. In this paper, we show that copulas can be extensively used to solve many financial problems
Persistent link: https://www.econbiz.de/10012721021
In this paper, we show that copulas are a very powerful tool for risk management since it fulfills one of its main goals: the modelling of dependence between the individual risks. That is why this approach is an open field for risk
Persistent link: https://www.econbiz.de/10012726072
This paper proposes a methodology to provide risk measures for portfolios during extreme events. The approach is based on splitting the multivariate extreme value distribution of the assets of the portfolio into two parts: the distributions of each asset and their dependence function. The...
Persistent link: https://www.econbiz.de/10012770284
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