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| Volume 9, No. 3,
December
2010 |
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A Versatile Copula and Its
Application to Risk Measures |
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| Jeungbo
Shim |
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Department of Business Administration,
Illinois Wesleyan University, U.S.A. |
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| Eun-Joo
Lee |
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Department of Mathematics, Millikin
University, U.S.A. |
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| Seung-Hwan
Lee |
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Department of Mathematics and Computer
Science, Illinois Wesleyan University, U.S.A. |
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| Abstract |
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This paper
proposes a copula that has versatile properties. We apply grouped
t
and versatile t copulas to estimate Value at Risk and expected
shortfall using a sample of firms in the US property-liability
insurance industry. We perform goodness-of-fit tests to assess the
adequacy of the copula models selected. We find that a versatile
copula is effective in estimating dependence structures of
non-homogeneous multivariate risks. |
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Key words:
dependence structure; versatility; grouped t copula; value at risk |
| JEL
classification:
C00; C13 |
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