5 research outputs found
A concept of copula robustness and its applications in quantitative risk management
In financial and actuarial applications, marginal risks and their dependence structure
are often modelled separately. While it is sometimes reasonable to assume that the
marginal distributions are âknownâ, it is usually quite involved to obtain information on the copula (dependence structure). Therefore copula models used in practice
are quite often only rough guesses. For many purposes, it is thus relevant to know
whether certain characteristics derived from d-variate risks are robust with respect to
(at least small) deviations in the copula. In this article, a general concept of copula robustness is introduced and criteria for copula robustness are presented. These criteria
are illustrated by means of several examples from quantitative risk management. The
concept of aggregation robustness introduced by Embrechts et al. (Finance Stoch.
19:763â790, 2015) can be embedded in our framework of copula robustness