Risk Measurement Analysis Of Portfolio Based On Levy Copula Model

Portfolio risk measurement and portfolio allocation and multi asset pricing of financial derivatives such as related to modeling financial problems of a plurality of assets,the core is to solve two problems,namely the price processes and the dependence structure between marginal asset is captured accurately.Now the financial derivatives are increasingly rich and different portfolio is becoming more and more complex,however normal linear correlation under traditional model assuming shows the obvious defects.Models can describing the marginal asset prices and dependencies structurebetween assets accurately contribute to the more effective solution for financial derivatives pricing,portfolio risk management and market risk spillover effects.In this paper,based on the related property theorem of Levy process,combining with the actual characteristics of asset price in real financial market,the advantage of using Levy process to model the dynamic process of asset price is analyzed.This paper mainly introduces the popular gamma variance in the infinite pure jump Levy process,and gives its Monte Carlo simulation algorithm;Based on the distributional Copula model,paper introduces Levy Copula model characterising the dependent structure of the Levy process,and gives the simulation algorithm.The model extended from the the traditional distributional Copula model,the detailed description about the difference will be given.Finally,based on the Copula Levy model,this paper gives the risk measurement of tail jumps,and analyzes the impact of the measure on the portfolio risk measurement and asset allocation through simulation studies.The principal advantage of distributional copulas is that they allow us to separate the dependence structure from the marginal distributions completely.The marginal process of the simulation part uses the gamma variance model,dependence structure selectes Levy Copula Clayton model.The conclusion shows that the structure of the tail jump between the assets can not be ignored,otherwise the optimal weight allocation of the investment portfolio will be affected.