Extremal Copulas and Tail Dependence in Modeling Stochastic Financial Risk

Authors

  • Hassane Abba Mallam FAST- Université Abdou Moumouni
  • Natatou Dodo Moutari FAST- Université Abdou Moumouni
  • Barro Diakarya Université Thomas Sankara
  • Saley Bisso UAM, Université Abdou Moumouni

DOI:

https://doi.org/10.29020/nybg.ejpam.v14i3.3951

Keywords:

Copulas, extreme values theory, stochastic process, tail dependence, Value at risk

Abstract

These last years the stochastic modeling became essential in financial risk management related to the ownership and valuation of financial products such as assets, options and bonds. This paper presents a contribution to the modeling of stochastic risks in finance by using both extensions of tail dependence coefficients and extremal dependance structures based on copulas. In particular, we show that when the stochastic behavior of a set of risks can be modeled by a multivariate extremal process a corresponding form of the underlying copula describing their
dependence is determined. Moreover a new tail dependence measure is proposed and properties of this measure are established.

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How to Cite

Mallam, H. A., Moutari, N. D., Diakarya, B., & Bisso, S. (2021). Extremal Copulas and Tail Dependence in Modeling Stochastic Financial Risk. European Journal of Pure and Applied Mathematics, 14(3), 1057–1081. https://doi.org/10.29020/nybg.ejpam.v14i3.3951