Application of Archimedean Copulas in Risk Analysis for Stock Markets

摘要

This paper discusses the application of Archimedean Copulas in financial market risk calculation, using Archimedean Copula to calculate the risk of different portfolio. After estimating the Archimedean Copula, we use Monte Carlo simulation method to simulate daily returns of Shenzhen Stock Composite Index (zz399106) and Shenzhen Stock Component Index (cz399001) and then calculate portfolio's VaR and conditional VaR.(CVaR). The real analysis indicates that the copula theory and copula based VaR and CVaR methods do better in the risk management than the normal hypothesis.