Bernstein Approximations to the Copula Function and Portfolio Optimization
Satchell, Stephen E.
Cambridge Working Papers in Economics
Faculty of Economics
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Sancetta, A., & Satchell, S. E. (2004). Bernstein Approximations to the Copula Function and Portfolio Optimization. https://doi.org/10.17863/CAM.5444
The copula function is considered within the context of financial multivariate data sets that are not normally distributed. The Bernstein polynomial approximation to copulae is given and motivated by its desirable properties. The multivariate convergence properties are analysed. The concept of Bernstein copula is introduced as a generalisation of some bivariate and higher dimensional families of copulae. Statistical properties of the Bernstein copula are studied together with implementation issues related to portfolio theory and expected utility optimisation.
Classification-JEL: G11, C49, copulae, Bernstein polynomials, approximation theory, portfolio
This record's DOI: https://doi.org/10.17863/CAM.5444
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