Abstract

http://ssrn.com/abstract=1603542
 


 



Copula-VAR and Copula-VAR-GARCH Modelling: Dangers for Value at Risk and Impulse Response Functions


Carluccio Bianchi


University of Pavia - Department of Economics and Management

Maria Elena De Giuli


University of Pavia - Department of Political Economy and Quantitative Methods

Mario Maggi


affiliation not provided to SSRN

Dean Fantazzini


Moscow School of Economics, Moscow State Universitgy; National Research University Higher School of Economics

May 9, 2010

THE RISK MODELING EVALUATION HANDBOOK, McGraw-Hill, pp. 321-338, 2010

Abstract:     
Copulae have been recently proposed as a statistical tool to build flexible multivariate distributions, since they allow for a rich dependence structure and more flexible marginal distributions that better fit the features of empirical financial and economic data. Our simulation studies investigate how misspecification in the marginals may affect the estimation of the dependence function represented by the copula and the effects of these biases for Value at Risk and Impulse Response Functions analysis. We show that the use of normal marginals when the true Data Generating Process is leptokurtic, produces biased estimates of the correlations. This may results in more aggressive Value at Risk estimates or in smaller confidence bands when computing Impulse Response Functions.

Accepted Paper Series


Not Available For Download

Date posted: May 11, 2010  

Suggested Citation

Bianchi, Carluccio and De Giuli, Maria Elena and Maggi, Mario and Fantazzini, Dean, Copula-VAR and Copula-VAR-GARCH Modelling: Dangers for Value at Risk and Impulse Response Functions (May 9, 2010). THE RISK MODELING EVALUATION HANDBOOK, McGraw-Hill, pp. 321-338, 2010. Available at SSRN: http://ssrn.com/abstract=1603542

Contact Information

Carluccio Bianchi
University of Pavia - Department of Economics and Management ( email )
Strada Nuova, 65
Pavia, 27100
Italy
+390382986212 (Phone)
+390382304226 (Fax)
HOME PAGE: http://economia.unipv.it/pagp/pagine_personali/cbianchi/bianchi.htm
Maria Elena De Giuli
University of Pavia - Department of Political Economy and Quantitative Methods ( email )
27100 Pavia
Italy
Mario Maggi
affiliation not provided to SSRN ( email )
Dean Fantazzini (Contact Author)
Moscow School of Economics, Moscow State Universitgy ( email )
GSP-2, Leninskie Gory
Moscow, 119992
Russia
+7 495 5105256 (Phone)
+7 495 5105267 (Fax)
HOME PAGE: https://sites.google.com/site/deanfantazzini/
National Research University Higher School of Economics ( email )
Myasnitskaya street, 20
Moscow, Moscow 119017
Russia
HOME PAGE: http://www.hse.ru/org/persons/11532644

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