Copula Methods in Finance / Edition 1

Hardcover (Print)
Used and New from Other Sellers
Used and New from Other Sellers
from $88.98
Usually ships in 1-2 business days
(Save 47%)
Other sellers (Hardcover)
  • All (13) from $88.98   
  • New (7) from $114.86   
  • Used (6) from $88.98   


Copula Methods in Finance is the first book to address the mathematics of copula functions illustrated with finance applications.  It explains copulas by means of applications to major topics in derivative pricing and credit risk analysis.  Examples include pricing of the main exotic derivatives (barrier, basket, rainbow options) as well as risk management issues.  Particular focus is given to the pricing of asset-backed securities and basket credit derivative products and the evaluation of counterparty risk in derivative transactions.

Read More Show Less

Editorial Reviews

From the Publisher
"...This book is of great use for researchers as well as practitioners..." (Statistical Papers, July 2005)
Read More Show Less

Product Details

  • ISBN-13: 9780470863442
  • Publisher: Wiley
  • Publication date: 7/26/2004
  • Series: Wiley Finance Series, #269
  • Edition number: 1
  • Pages: 310
  • Product dimensions: 6.93 (w) x 9.67 (h) x 0.92 (d)

Meet the Author

UMBERTO CHERUBINI is Associate Professor of MathematicalFinance at the University of Bologna, and partner in PolyhedronComputational Finance, Florence, Italy. He is fellow of FERC, CassBusiness School, London and Ente Einaudi, Bank of Italy, Rome. Hehas also taught graduate finance courses at Catholic University inMilan, Hitotsubashi University in Tokyo, and is supervisor of theMarket Risk Area at the risk management education program of theItalian Banking Association (ABI). He is a member of theindependent screening committee of TLX, the new Italian structuredproducts market. Before joining the academia, he was with theEconomic Research Department of Banca Commerciale Italiana, wherehe was Head of the Risk Management Unit.

ELISA LUCIANO, Ph.D., is Full Professor of MathematicalFinance at the University of Turin (Italy), Fellow of ICER, Turin,and Associate Fellow of FERC, Cass Business School, London. Shealso teaches at the École Nationale Supérieure deCachan, Paris, and at the École Supérieure enSciences Informatiques, Université de Nice-Sophia Antipolis,France. Her main research interest is Quantitative Finance, withspecial emphasis on portfolio selection and risk measurement. Shehas published extensively in Academic journals, including theJournal of Finance and Applied Mathematical Finance.

WALTER VECCHIATO is Head of Risk Management and Researchat Veneto Banca in Montebelluna Treviso, Italy. Previously he wasHead of Credit Derivatives Analysis at Banca Intesa in Milan,Italy. He was also Professor of Applied Statistics in University ofPavia, Italy and he was Visiting Researcher in FinancialEconometrics at University of California at San Diego, La Jolla. Heenhanced his research with the presence of Nobel Economic Sciences2003 award winner Professor Robert F. Engle. He has written andpublished on quantitative finance and risk management techniques.He is a referee for many academic and practitioner journals and afrequent speaker for many symposiums on Finance worldwide.

Read More Show Less

Table of Contents

Preface xi

List of Common Symbols and Notations xv

1 Derivatives Pricing, Hedging and Risk Management: The Stateof the Art 1

1.1 Introduction 1

1.2 Derivative pricing basics: the binomial model 2

1.3 The Black–Scholes model 7

1.4 Interest rate derivatives 13

1.5 Smile and term structure effects of volatility 18

1.6 Incomplete markets 21

1.7 Credit risk 27

1.8 Copula methods in finance: a primer 37

2 Bivariate Copula Functions 49

2.1 Definition and properties 49

2.2 Frèchet bounds and concordance order 52

2.3 Sklar’s theorem and the probabilistic interpretationof copulas 56

2.4 Copulas as dependence functions: basic facts 70

2.5 Survival copula and joint survival function 75

2.6 Density and canonical representation 81

2.7 Bounds for the distribution functions of sum of r.v.s 84

2.8 Appendix 87

3 Market Comovements and Copula Families 95

3.1 Measures of association 95

3.2 Parametric families of bivariate copulas 112

4 Multivariate Copulas 129

4.1 Definition and basic properties 129

4.2 Frechet bounds and concordance order: the multidimensionalcase 133

4.3 Sklar's theorem and the basic probabilistic interpretation:the multidimensional case 135

4.4 Survival copula and joint survival function 140

4.5 Density and canonical representation of a multidimensionalcopula 144

4.6 Bounds for distribution functions of sums of n randomvariables 145

4.7 Multivariate dependence 146

4.8 Parametric families of n-dimensional copulas 147

5 Estimation and Calibration from Market Data 153

5.1 Statistical inference for copulas 153

5.2 Exact maximum likelihood method 154

5.3 IFM method 156

5.4 CML method 160

5.5 Non-parametric estimation 161

5.6 Calibration method by using sample dependence measures172

5.7 Application 174

5.8 Evaluation criteria for copulas 176

5.9 Conditional copula 177

6 Simulation of Market Scenarios 181

6.1 Monte Carlo application with copulas 181

6.2 Simulation methods for elliptical copulas 181

6.3 Conditional sampling 182

6.4 Marshall and Olkin’s method 188

6.5 Examples of simulations 191

7 Credit Risk Applications 195

7.1 Credit derivatives 195

7.2 Overview of some credit derivatives products 196

7.3 Copula approach 202

7.4 Application: pricing and risk monitoring a CDO 210

7.5 Technical appendix 225

8 Option Pricing with Copulas 231

8.1 Introduction 231

8.2 Pricing bivariate options in complete markets 232

8.3 Pricing bivariate options in incomplete markets 239

8.4 Pricing vulnerable options 243

8.5 Pricing rainbow two-color options 253

8.6 Pricing barrier options 267

8.7 Pricing multivariate options: Monte Carlo methods 278

Bibliography 281

Index 289

Read More Show Less

Customer Reviews

Be the first to write a review
( 0 )
Rating Distribution

5 Star


4 Star


3 Star


2 Star


1 Star


Your Rating:

Your Name: Create a Pen Name or

Barnes & Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation


  • - By submitting a review, you grant to Barnes & and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Terms of Use.
  • - Barnes & reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously

    If you find inappropriate content, please report it to Barnes & Noble
    Why is this product inappropriate?
    Comments (optional)