Does Tail Dependence Make A Difference In the Estimation of ...
Tail Dependence
description
Transcript of Tail Dependence
Tail Dependence
Fat TailsMicro Correlations
Tail Dependence
“When sorrows come, they come…in battalions.”King Claudius, Hamlet Prince of Denmark, Act 4 Scene 5
Cooke and Kousky nsf# 0960865
http://www.rff.org/Events/Pages/Introduction-Climate-Change-Extreme-Events.aspx
Here’s what killed your 401(k)
Tail dependence: Correlations are in the High (or low) values
Two loss variablesindependent dependent (0.1) 401K killer
Copulaindependent dependent (0.1) 401K killer
Sums of 40 loss variables independent dependent 401K killer
Copula: sums of 40independent 401K killer
Sums of 40401K killer Tail dependent
Copula: sums of 40401K killer tail dependent
Copula: sums of 40401K killer tail dependent
Copula: sums of 40401K killer tail dependent
Tail dependence Bad things happen together
“ fatally flawed way to assess risk”
Tail Dependence:Ignore it at your 401K’s
peril
Fat TailsMicro Correlations
The Unholy Trinity:http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=20949