Calibrating and Simulating Copula Functions in Financial Applications

Copula functions can be utilized in financial applications to determine the dependence structure of asset returns portfolio. Empirical evidence has proved inadequacy multi-normal distribution, traditionally adopted model distribution. employed a flexible way for building efficient algorithms and simulate more adequate distribution assets. This paper aims describe some simple statistical procedures currently calibrate copula market data. Furthermore, we present useful methods choosing which function better fits real Also, random variates from certain types are illustrated. Finally, illustration purposes, previous described applied two Italian equities. In particular, show how generate Monte Carlo scenarios equity log-returns bivariate case using different functions.