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Article: Distorted mix method for constructing copulas with tail dependence

TitleDistorted mix method for constructing copulas with tail dependence
Authors
Issue Date2014
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime
Citation
Insurance: Mathematics and Economics, 2014, v. 57, p. 77-89 How to Cite?
AbstractThis paper introduces a method for constructing copula functions by combining the ideas of distortion and convex sum, named Distorted Mix Method. The method mixes different copulas with distorted margins to construct new copula functions, and it enables us to model the dependence structure of risks by handling the central and tail parts separately. By applying the method we can modify the tail dependence of a given copula to any desired level measured by tail dependence function and tail dependence coefficients of marginal distributions. As an application, a tight bound for asymptotic Value-at-Risk of order statistics is obtained by using the method. An empirical study shows that copulas constructed by this method fit the empirical data of SPX 500 Index and FTSE 100 Index very well in both central and tail parts.
Persistent Identifierhttp://hdl.handle.net/10722/199239
ISSN
2015 Impact Factor: 1.378
2015 SCImago Journal Rankings: 1.000

 

DC FieldValueLanguage
dc.contributor.authorLi, Len_US
dc.contributor.authorYuen, KCen_US
dc.contributor.authorYang, Jen_US
dc.date.accessioned2014-07-22T01:09:56Z-
dc.date.available2014-07-22T01:09:56Z-
dc.date.issued2014en_US
dc.identifier.citationInsurance: Mathematics and Economics, 2014, v. 57, p. 77-89en_US
dc.identifier.issn0167-6687-
dc.identifier.urihttp://hdl.handle.net/10722/199239-
dc.description.abstractThis paper introduces a method for constructing copula functions by combining the ideas of distortion and convex sum, named Distorted Mix Method. The method mixes different copulas with distorted margins to construct new copula functions, and it enables us to model the dependence structure of risks by handling the central and tail parts separately. By applying the method we can modify the tail dependence of a given copula to any desired level measured by tail dependence function and tail dependence coefficients of marginal distributions. As an application, a tight bound for asymptotic Value-at-Risk of order statistics is obtained by using the method. An empirical study shows that copulas constructed by this method fit the empirical data of SPX 500 Index and FTSE 100 Index very well in both central and tail parts.-
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/imeen_US
dc.relation.ispartofInsurance: Mathematics and Economicsen_US
dc.rightsNOTICE: this is the author’s version of a work that was accepted for publication in Insurance: Mathematics and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Insurance: Mathematics and Economics, 2014, v. 57, p. 77-89. DOI: 10.1016/j.insmatheco.2014.05.002en_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleDistorted mix method for constructing copulas with tail dependenceen_US
dc.typeArticleen_US
dc.identifier.emailYuen, KC: kcyuen@hku.hken_US
dc.identifier.authorityYuen, KC=rp00836en_US
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.insmatheco.2014.05.002-
dc.identifier.scopuseid_2-s2.0-84901774232-
dc.identifier.hkuros231685en_US
dc.identifier.volume57en_US
dc.identifier.spage77en_US
dc.identifier.epage89en_US
dc.publisher.placeNetherlands-

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