Copula Theory And Its Application In The Financial Analysis

With the development of financial globalization, financial market interdependence is more and more strong, the price fluctuation in financial market cooperation will lead to another local fluctuations in financial markets, causing the overall financial market turbulence. This makes the financial market risks facing the increasingly complex and diverse, the financial market risk measurement has been showing a nonlinear, asymmetric and tail correlation feature, and the traditional based on the normal distribution assumption of linear correlation analysis and other methods are no longer suitable to describe the financial risk related information. The Copula function is a kind of descriptive variables related to the structure of the novel tools, widely used in the field of financial risk management.This paper systematically introduced the Copula function concept, classification and properties, and discusses several commonly used Copula function; based on the theory of Copula display than the traditional correlation coefficient in the correlation analysis of the advantages, especially in the measure of tail dependence is very flexible and convenient, and discuss the parameter estimation and model selection problem; finally the Copula theory is applied in the field of financial risk management, using Copula-GARCH-GED model analysis of China's Shanghai and Shenzhen stock index of the dependency relation, use Copula-GARCH-t model to study our country fund and stock tail dependency relationship. The results show that based on the theory of Copula time series model can be flexible and effective to measure the risk correlation, for the financial investment, risk analysis and applications to provide good reference method and strategy.