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Dependence Structure and Risk Measure

Thierry Ané and Cécile Kharoubi
The Journal of Business
Vol. 76, No. 3 (July 2003), pp. 411-438
DOI: 10.1086/375253
Stable URL:
Page Count: 28
Subjects: Business Finance
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Understanding the relationships among multivariate assets would help one greatly about how best to position one’s investments and enhance one’s financial risk protection. We present a new method to model parametrically the dependence structure of stock index returns through a continuous distribution function, which links an n‐dimensional density to its one‐dimensional margins. The resulting multivariate model could be used in a wide range of financial applications. Focusing on risk management, we show that a misspecification of the dependence structure introduces, on average, an error in Value‐at‐Risk estimates.

Notes and References

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