Copula Modelling to Analyse Financial Data

Copula modelling is a popular tool in analysing the dependencies between variables. allows investigation of tail dependencies, which particular interest risk and survival applications. also specific to economic financial as it can help prediction contagion periods “boom” or “bust”. Bivariate copula has rich variety copulas that may be chosen represent modelled dataset possible extreme events lie within tails. Financial tends diverge this richness types literature not well realised with two different modelling, one being non-time-series other time-series, undertaken differently. This paper investigates standard shows why strategies using time-series methods. difference, apart from issues surrounding component, mostly due having ability use empirical CDFs for probability integral transformation. uses pseudo-CDFs standardized residuals centred around zero. The inhibit estimation distributions required constructing model usual manner.