In this paper we suggest the adoption of copula functions in order to price multivariate contingent claims. Copulas enable us to imbed the marginal distributions extracted from vertical spreads in the options markets in a multivariate pricing kernel. We prove that such kernel is a copula...

We propose a new index for measuring the systemic risk of default of the banking sector, which is based on a homogeneous version of multivariate intensity based models (Cuadras–Augé distribution). We compute the index for 10 European countries, exploiting the information incorporated in the...

A problem that is very relevant in applications of copula functions to finance is the computation of the survival copula, which is applied to enforce multivariate put-call parity. This may be very complex for large dimensions. The problem is a special case of the more general problem of volume...

We propose a new index for measuring the systemic risk of default of the banking sector, which is based on a homogeneous version of multivariate intensity based models (Cuadras – Augé distribution). We compute the index for 10 European countries, exploiting the information incorporated in the...

We propose a general treatment of random variables aggregation accounting for the dependence among variables and bounded or unbounded support of their sum. The approach is based on the extension to the concept of convolution to dependent variables, involving copula functions. We show that some...

This paper suggests a new technique to construct first order Markov processes using products of copula functions, in the spirit of Darsow et al. (1992) [10]. The approach requires the definition of (i) a sequence of distribution functions of the increments of the process, and (ii) a...

We propose a hierarchical Marshall–Olkin model of countrywide systemic risk. At the lower level, we model the systemic risk of a crisis within the banking system (that we call “within” systemic risk) and at the higher level we model the probability of a joint default of the banking system...

type="main" xml:lang="en" <p>In this paper we present a value-at-risk measure which accounts for market liquidity. We show that taking into account market liquidity implies a decoupling of valuation of long and short positions. We present a pricing model, named fuzzy measure model, that yields...</p>

type="main" xml:lang="en" <p>This paper uses copula functions to evaluate tail probabilities and market risk trade-offs at a given confidence level, dropping the joint normality assumption on returns. Copulas enable one to represent distribution functions separating the marginal distributions from...</p>

We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of $d$ obligors, a set of $d$ idiosyncratic shocks and a shock that triggers the default of all them. All shocks are assumed to be linked by a...