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Application of copula and copula-CVaR in the multivariate portfolio optimization

  • Manying Bai*
  • , Lujie Sun
  • *Corresponding author for this work
  • Beihang University

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

In this article we resort to the copula theory and CVaR measures in the portfolio management, using copula function and copulaCVaR to design the portfolio optimization. We initially apply the three-dimensional Archimedean copula in the empirical study. After estimating the multi-dimensional copula, we use Monte Carlo method to generate the scenarios for the calculation of portfolio's variance and CVaR. Then we apply the minimum of copula based standard variance and CVaR as the objective function of the portfolio programming. The multivariate demonstration indicates that the copula theory and copula based CVaR method does better in the portfolio management than the normal hypothesis.

Original languageEnglish
Title of host publicationCombinatorics, Algorithms, Probabilistic and Experimental Methodologies - First International Symposium, ESCAPE 2007, Revised Selected Papers
PublisherSpringer Verlag
Pages231-242
Number of pages12
ISBN (Print)9783540744498
DOIs
StatePublished - 2007
Event1st International Symposium on Combinatorics, Algorithms, Probabilistic and Experimental Methodologies, ESCAPE 2007 - Hangzhou, China
Duration: 7 Apr 20079 Apr 2007

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume4614 LNCS
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349

Conference

Conference1st International Symposium on Combinatorics, Algorithms, Probabilistic and Experimental Methodologies, ESCAPE 2007
Country/TerritoryChina
CityHangzhou
Period7/04/079/04/07

Keywords

  • CVaR
  • Copula
  • GARCH
  • Portfolio optimization

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