A CLASS OF MULTIVARIATE TRANSFORMED-EXPONENTIAL DISTRIBUTIONS

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Abstract

In finance it is commonly accepted that heavy-tailed distributions are appropriate for modelling financial asset return variables and part of the financial literature has recently focused on them. Much less attention has been dedicated to the construction of joint models of asset returns unable to describe an adequate dependence structure between all these variables. In this paper we propose a procedure for constructing multivariate distributions with given heterogeneous heavy-tailed marginal distributions as a possible (under certain conditions) alternative to the copula approach. The procedure bases on the marginal transformation method and, for given plausible specifications of the marginal distributions of single asset returns, we consider appropriate transformations of above said variables in order to obtain, for the transformed variables, a tractable joint distribution and, in this way, take full advantage of that, while maintaining the heavy tail nature of the marginal distributions. A class of multivariate transformed-exponential distributions is introduced.
Lingua originaleEnglish
pagine (da-a)2-9
Numero di pagine8
RivistaANNALI DELLA FACOLTÀ DI ECONOMIA. UNIVERSITÀ DI PALERMO
VolumeLXVII
Stato di pubblicazionePublished - 2013

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Multivariate Distribution
Exponential distribution
Marginal Distribution
Heavy-tailed Distribution
Financial Modeling
Joint Model
Heavy Tails
Dependence Structure
Copula
Finance
Joint Distribution
Specification
Class
Alternatives

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title = "A CLASS OF MULTIVARIATE TRANSFORMED-EXPONENTIAL DISTRIBUTIONS",
abstract = "In finance it is commonly accepted that heavy-tailed distributions are appropriate for modelling financial asset return variables and part of the financial literature has recently focused on them. Much less attention has been dedicated to the construction of joint models of asset returns unable to describe an adequate dependence structure between all these variables. In this paper we propose a procedure for constructing multivariate distributions with given heterogeneous heavy-tailed marginal distributions as a possible (under certain conditions) alternative to the copula approach. The procedure bases on the marginal transformation method and, for given plausible specifications of the marginal distributions of single asset returns, we consider appropriate transformations of above said variables in order to obtain, for the transformed variables, a tractable joint distribution and, in this way, take full advantage of that, while maintaining the heavy tail nature of the marginal distributions. A class of multivariate transformed-exponential distributions is introduced.",
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AU - Bologna, Salvatore

PY - 2013

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AB - In finance it is commonly accepted that heavy-tailed distributions are appropriate for modelling financial asset return variables and part of the financial literature has recently focused on them. Much less attention has been dedicated to the construction of joint models of asset returns unable to describe an adequate dependence structure between all these variables. In this paper we propose a procedure for constructing multivariate distributions with given heterogeneous heavy-tailed marginal distributions as a possible (under certain conditions) alternative to the copula approach. The procedure bases on the marginal transformation method and, for given plausible specifications of the marginal distributions of single asset returns, we consider appropriate transformations of above said variables in order to obtain, for the transformed variables, a tractable joint distribution and, in this way, take full advantage of that, while maintaining the heavy tail nature of the marginal distributions. A class of multivariate transformed-exponential distributions is introduced.

UR - http://hdl.handle.net/10447/107028

UR - http://portale.unipa.it/dipartimenti/seas/.content/AnnaliFacolta/2013/Annali2013.pdf

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JO - ANNALI DELLA FACOLTÀ DI ECONOMIA. UNIVERSITÀ DI PALERMO

JF - ANNALI DELLA FACOLTÀ DI ECONOMIA. UNIVERSITÀ DI PALERMO

SN - 1827-8388

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