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Article: Distorted mix method for constructing copulas with tail dependence
Title | Distorted mix method for constructing copulas with tail dependence |
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Authors | |
Keywords | Copula Distorted Mix Method Distortion function Tail dependence coefficient Tail dependence function |
Issue Date | 2014 |
Publisher | Elsevier 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? |
Abstract | This 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 Identifier | http://hdl.handle.net/10722/199239 |
ISSN | 2023 Impact Factor: 1.9 2023 SCImago Journal Rankings: 1.113 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Li, L | en_US |
dc.contributor.author | Yuen, KC | en_US |
dc.contributor.author | Yang, J | en_US |
dc.date.accessioned | 2014-07-22T01:09:56Z | - |
dc.date.available | 2014-07-22T01:09:56Z | - |
dc.date.issued | 2014 | en_US |
dc.identifier.citation | Insurance: Mathematics and Economics, 2014, v. 57, p. 77-89 | en_US |
dc.identifier.issn | 0167-6687 | - |
dc.identifier.uri | http://hdl.handle.net/10722/199239 | - |
dc.description.abstract | This 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.language | eng | en_US |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime | en_US |
dc.relation.ispartof | Insurance: Mathematics and Economics | en_US |
dc.rights | NOTICE: 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.2014.05.002 | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Copula | - |
dc.subject | Distorted Mix Method | - |
dc.subject | Distortion function | - |
dc.subject | Tail dependence coefficient | - |
dc.subject | Tail dependence function | - |
dc.title | Distorted mix method for constructing copulas with tail dependence | en_US |
dc.type | Article | en_US |
dc.identifier.email | Yuen, KC: kcyuen@hku.hk | en_US |
dc.identifier.authority | Yuen, KC=rp00836 | en_US |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.insmatheco.2014.05.002 | - |
dc.identifier.scopus | eid_2-s2.0-84901774232 | - |
dc.identifier.hkuros | 231685 | en_US |
dc.identifier.volume | 57 | en_US |
dc.identifier.spage | 77 | en_US |
dc.identifier.epage | 89 | en_US |
dc.identifier.isi | WOS:000339536700008 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.issnl | 0167-6687 | - |