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2011•Systems EngineeringRequires access

Empirical Analysis on Portfolio Risk of Open-end Funds Based on Copula-TARCH

Zhou Zai-li

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Abstract

This paper,by taking Huaxia growing fund shares before 10 for example,establishes the AR(1)-TARCH-t(1,1)model.First the gaussian Copula Function and the t-Copula Function are used to transit the marginal distribution of each asset returns into the united distribution of the fund portfolio.Then the risk of the fund portfolio is calculated by combining Monte-Carlo simulation technique.Empirical results show that the choice of Copula function affects the value-at-risk of the fund portfolio,and that the VaR simulated by the t-Copula Function is more conservative.

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What this paper is about

This paper,by taking Huaxia growing fund shares before 10 for example,establishes the AR(1)-TARCH-t(1,1)model.First the gaussian Copula Function and the t-Copula Function are used to transit the marginal distribution of each asset returns into the united distribution of the fund portfolio.Then the risk of the fund portfolio is calculated by combining Monte-Carlo simulation technique.Empirical results show that the choice of Copula function affects the value-at-risk of the fund portfolio,and that the VaR simulated by the t-Copula Function is more conservative.

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Available abstract

This paper,by taking Huaxia growing fund shares before 10 for example,establishes the AR(1)-TARCH-t(1,1)model.First the gaussian Copula Function and the t-Copula Function are used to transit the marginal distribution of each asset returns into the united distribution of the fund portfolio.Then the risk of the fund portfolio is calculated by combining Monte-Carlo simulation technique.Empirical results show that the choice of Copula function affects the value-at-risk of the fund portfolio,and that the VaR simulated by the t-Copula Function is more conservative.

Key concepts: Copula (linguistics), Portfolio, Economics, Econometrics, Financial economics, Portfolio optimization

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