Modeling Dependence With Copulas In Risk Management

Abstract

This thesis is to study the modelling with copulas and its usage in financial risk and portfolio management. We will present the construction of vines and vine copulas and fitting copulas in detail step-by-step, based on the studies of Mendes, Semeraro and Leal [22], Brechmann and Czado [5]. We also show how vine copulas could work as a powerful tool for even more elaborate models in finance, in contrast to conventional approaches in dependence modeling with copulas. We illustrate the theoretical model with numerical simulations by programming in R. The data used in this thesis is price data from VCB, CTD and PNJ stocks traded on the Ho Chi Minh Stocks Exchange (HOSE)