MODELING DEPENDENT FINANCIAL ASSETS BY DYNAMIC COPULA AND PORTFOLIO OPTIMIZATION BASED ON CVAR

Authors : Sibel AÇIK KEMALOGLU, Emel KIZILOK KARA

Pages : 1-13

Doi:10.1501/Commua1_0000000723

View : 14 | Download : 10

Publication Date : 2015-02-01

Article Type : Research Paper

Abstract :This paper is concerned with the statistical modeling of the dependence structure of multivariate financial data using copula. Since financial data is greatly affected by the economic factors, it often varies according to the time. Therefore, dynamic copula model is used that takes into account the time-varying. In addition, portfolio optimization based on Mean-CVaR modelis applied with Monte Carlo simulation. As an application, a portfolio withfour different Indexes is constructed from the Turkish financial markets. Themarginal distributions of assets in the portfolio are estimated and parameterestimates are given for the different copula models. The portfolio optimizationbased on CVaR is made for the portfolio created from the specified copula model
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