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The latest tools and techniques for pricing and risk managementThis book introduces readers to the use of copula functions to represent the dynamics of financial assets and risk factors, integrated temporal and cross-section applications. The first part of the book will briefly introduce the standard the theory of copula functions, before examining the link between copulas and Markov processes. It will then introduce new techniques to design Markov processes that are suited to represent the dynamics of market risk factors and their co-movement, providing techniques to both estimate and simulate such dynamics. The second part of the book will show readers how to apply these methods to the evaluation of pricing of multivariate derivative contracts in the equity and credit markets. It will then move on to explore the applications of joint temporal and cross-section aggregation to the problem of risk integration.
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P1: TIX/XYZ JWBK526-fm P2: ABC JWBK526-Cherubini August 31, 2011 7:13 Printer: Yet to come P1: TIX/XYZ JWBK526-fm P2: ABC JWBK526-Cherubini August 31, 2011 7:13 Printer: Yet to come Dynamic Copula Methods in Finance i P1: TIX/XYZ JWBK526-fm P2: ABC JWBK526-Cherubini August 31, 2011 7:13 Printer: Yet to come For other titles in the Wiley Finance series please see www.wiley.com/finance ii P1: TIX/XYZ JWBK526-fm P2: ABC JWBK526-Cherubini August 31, 2011 7:13 Printer: Yet to come Dynamic Copula Methods in Finance Umberto Cherubini Fabio Gobbi Sabrina Mulinacci Silvia Romagnoli A John Wiley & Sons, Ltd., Publication iii P1: TIX/XYZ JWBK526-fm P2: ABC JWBK526-Cherubini August 31, 2011 7:13 Printer: Yet to come This edition first published 2012 © 2012 John Wiley & Sons, Ltd Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com. The right of the authors to be identified as the authors of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should