Open AccessCopulas, Multivariate Risk - Neutral Distributions and Implied Dependence Functions
Author(s) -
Sophie Coutant,
Valdo Durrleman,
Grégory Rapuch,
Thierry Roncalli
Publication year - 2001
Publication title -
ssrn electronic journal
Language(s) - English
Resource type - Journals
ISSN - 1556-5068
DOI - 10.2139/ssrn.1032562
Subject(s) - multivariate statistics , copula (linguistics) , econometrics , mathematics , tail dependence , multivariate analysis , statistics , economics
In this paper, we use copulas to define multivariate risk - neutral distributions. We can then derive general pricing formulas for multi - asset options and best possible bounds with given volatility smiles. Finally, we then apply the copula framework to define 'forward-looking' indicators of the dependence function between asset returns.
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