Application Of Copula Function In The Default Correlation Measure

The two key issues in today's credit risk management of financial products are the choice of risk indicators and the processing of correlated default. Correlated default is a new topic of current financial risk research, the aim of it is through by correlation measure to get a more accurate assessment of default correlation between enterprises. Traditional method of relevance measurement is Pearson (Pearson) correlation coefficient method, but The Pearson correlation coefficient method of data sources and data attributes have a very demanding, and the calculated results with the inevitable errors.So Copula Theory in recent years has been widely used by experts and scholars. With the Copula function to characterize the correlation between the structure of financial markets, not only can choose a better description of the distribution function of the risk of asset returns, but also the correlation between financial market structure,stripping out a more comprehensive characterization of the dependence between the degree of risk assets.Copula function is the joint distribution function of random vectors and its corresponding marginal distribution function of the various components function together, it is an important tool for describe the correlation structure between the various financial markets. It is constructed using the joint distribution function, distribution function from the edge of the restrictions and it can take random vectors of the marginal distribution function and its dependency structure to be studied separately. The key to take Copula functions to build the relevance of corporate defaults is selecting a suitable function from the tribe and large numbers of Copula function. Commonly methods are icon method, goodness of fit test and the minimum variance test. This paper describes the Copula theory, Classification and nature of the Copula Function. And use icon method, minimum variance method to select the appropriate for the data of Qingdao Haier and Mei De electrical's number of daily stock price returns from August 31,2005 to August 31,2009 as the original analysis to optimal Copula Function, at last, use the tail of the correlation coefficient to describe the correlation between enterprises of non.