TY  - CHAP
AB  - Gaussian copula is by far the most popular copula used in the financial industry in default dependency modeling. However, it has a major drawback – it does not exhibit tail dependence, a very important property for copula. The essence of tail dependence is the interdependence when extreme events occur, say, defaults of corporate bonds. In this paper, we show that some tail dependence can be restored by introducing stochastic volatility on a Gaussian copula. Using perturbation methods we then derive an approximate copula – called perturbed Gaussian copula in this paper.
VL  - 22
SN  - 978-1-84855-196-1, 978-1-84855-197-8/0731-9053
DO  - 10.1016/S0731-9053(08)22005-0
UR  - https://doi.org/10.1016/S0731-9053(08)22005-0
AU  - Fouque Jean-Pierre
AU  - Zhou Xianwen
ED  - Jean-Pierre Fouque
ED  - Thomas B. Fomby
ED  - Knut Solna
PY  - 2008
Y1  - 2008/01/01
TI  - Perturbed Gaussian copula
T2  - Econometrics and Risk Management
T3  - Advances in Econometrics
PB  - Emerald Group Publishing Limited
SP  - 103
EP  - 121
Y2  - 2024/04/25
ER  -