The Application Of Copula Theory In Financial Analysis

Copula theory is a new financial analysis. Copula function can link random variables with the joint distribution of their respective marginal distribution. Using financial model with Copula theory, random variables can be on the brink of distribution and the correlation between their respective structure, which can be described by a Copula function. This approach can effectively describe the random variables related, but also to reflect their related patterns. In this work, the application of copula theory in financial analysis is studied. Risk assets Copula model is established and used to calculate VaR and CVaR. Correlation of financial markets was analyzed by Copula. Tail related measure of Copula function is discussed.The main achievements of this work are listed as follows:⑴Risk assets Copula model is established. VaR and CVaR of investment portfolio be counted by Monte Carlo simulation. In Copula model, t-EGARCH model was chosen to simulate the distribution of individual assets. Copula function was introduced into the calculation of CVaR. Covariance matrix was estimated better.⑵The application of Copula function in financial market-related analysis is discussed, particularly the Copula tail correlation analysis. The relevant conclusions with the coefficient of tail dependence of linear mixed Copula are deduced.