In this paper we discuss some statistical pitfalls that may occur in modeling cross-dependences with copulas in financial applications. In particular we focus on issues arising in the estimation and the empirical choice of copulas as well as in the design of time-dependent copulas

In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected Shortfall with respect to portfolio allocation when netting between positions exists. As a particular case, we examine a simple Gaussian example in order to illustrate the impact of netting...

We develop a new method for generating dynamics of conditional correlation matrices between asset returns. These correlation matrices will be parameterized by a subset of their partial correlations, whose structure will be described by an undirected graph called \vine". Since such partial...

We provide conditions for the existence and the unicity of strictly stationary solutions of the usual Dynamic Conditional Correlation GARCH models (DCC-GARCH). The proof is based on Tweedie's (1988) criteria, after having rewritten DCC-GARCH models as nonlinear Markov chains. Moreover, we study...

We define a new approach to manage prepayment, default and interest rate risks simultaneously in some standard asset-backed securities structures. We propose a parsimonious top-down approach, by modeling directly the portfolio loss process and the amortization process. Both are correlated to...

This work focuses on modeling the dynamics of volatilities and correlations between financial assets returns. After a literature review of univariate and multivariate GARCH-type models, the author establishes results for the existence and uniqueness of stationary solutions of dynamic...

We provide conditions for the existence and the unicity of strictly stationary solutions of the usual Dynamic Conditional Correlation GARCH models (DCC-GARCH). The proof is based on Tweedie's (1988) criteria, after having rewritten DCC-GARCH models as nonlinear Markov chains. Moreover, we study...

We propose a new goodness-of-fit test for copulas, based on empirical copula processes and nonparametric bootstrap counterparts. The standard Kolmogorov-Smirnov type test for copulas that takes the supremum of the empirical copula process indexed by orthants is extended by test statistics based...

We provide a rigorous proof of granularity adjustment (GA) formulas to evaluate loss distributions and risk measures (value-at-risk) in the case of heterogenous portfolios, multiple systematic factors and random recoveries. As a significant improvement with respect to the literature, we detail...