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Fat Tails and Extreme Events [18]

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Bullet points include: Copulas are rather complicated mathematically. Typically simpler correlation based aggregation techniques are used instead. In a portfolio construction context involves a factor-based model of the world. Vastly reduces number of parameters that need estimating (if large universe). An entire risk model vendor industry focuses on how to create such models, involving one or more of the following: Fundamental risk models. Econometric risk models. Statistical risk models

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