Copulas have become an important tool in the modern best practice Enterprise Risk Management, often supplanting other approaches to modelling stochastic dependence. However, choosing the 'right' copula is not an easy task, and the temptation to prefer a tractable rather than a meaningful...

One of the most important factors to control for the achievements of investment portfolio returns is risk. If we only think that a 100% positive return is needed to recover a portfolio loss of 50%, we can understand why. With the advent of the exponential growth of technology usage in markets,...

Linear correlation is only an adequate means of describing the dependence between two random variables when they are jointly elliptically distributed. When the joint distribution of two or more variables is not elliptical the linear correlation coefficient becomes just one of many possible ways...

The inefficiency term in stochastic frontier models is usually assumed to have positive skewness; but when this assumption is not met, efficiency scores are overestimated. Potential endogeneity of model regressors poses an additional empirical challenge and greatly hinders identification of...

We propose a new approach to evaluating copula-based multivariate density forecasts. Employing Hansen’s SPA test and conducting multiple comparisons of fully-parametric models, our approach accommodates possible misspecifications in the multivariate joint and the univariate marginal...

This paper investigates the dependence structure between the equity market and the foreign exchange market by using copulas. In particular, several copulas with different dependence structure are compared and used to directly model the underlying dependence structure. We find that there exists...

While environmental, social, and governance (ESG) trading activity has been a distinctive feature of financial markets, the debate if ESG scores can also convey information regarding a company's riskiness remains open. Regulatory authorities, such as the European Banking Authority (EBA), have...

This paper extends the evolution equation of Patton (2006) for the time variation of the copula parameters by specifying an autoregressive fractionally integrated term. For any copula parameter there is a suitable one-to-one transformation so that the maximum likelihood estimation method may be...