Shape-based scenario generation using copulas

Kaut, Michal; Wallace, Stein W.

doi:10.1007/s10287-009-0110-y

Cited by 62 publications

(35 citation statements)

References 30 publications

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“…This is the model used in Kaut and Wallace (2011); we also use the same data, so the results are directly comparable.…”

Section: Test Case: Cvar-based Portfolio Optimization Modelmentioning

confidence: 99%

“…The e ect of using correlations in such situations is investigated in Kaut and Wallace (2011), which con rms that correlations can indeed lead to sub-optimal solutions to the stochastic model. The paper also shows that the problem can be addressed by modelling the dependence using copulas instead of correlations, and describes how such scenariogeneration methods could work.…”

Section: Introductionmentioning

confidence: 97%

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A copula-based heuristic for scenario generation

Kaut

2013

Comput Manag Sci

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in: Computational Management Science. See also B T E X entry below. This paper presents a new heuristic for generating scenarios for two-stage stochastic programs. The method uses copulas to describe the dependence between the marginal distributions, instead of the more common correlations. The heuristic is then tested on a simple portfolio-selection model, and compared to two other scenario-generation methods. B T E X:

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“…This is the model used in Kaut and Wallace (2011); we also use the same data, so the results are directly comparable.…”

Section: Test Case: Cvar-based Portfolio Optimization Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

A copula-based heuristic for scenario generation

Kaut

2013

Comput Manag Sci

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“…We thus believe that the next improvement should come there, possibly by using copula in the way suggested in Kaut and Wall [14] -something we leave for future research.…”

Section: Discussionmentioning

confidence: 99%

Scenario generation with distribution functions and correlations

Kaut¹,

Lium²

2015

Kybernetika

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“…Here comes a need to construct the scenarios tree for representing the underlying uncertainty. In this context, in the paper (Kaut and Wallace 2006), it is argued that it is rather complicated to generate a scenario tree with implemented particular copula function for dependent stochastic variables. In their paper, the moment matching method was used to generate copula-based scenarios.…”

Section: Short Overview Of Decision-making Modelsmentioning

confidence: 99%

Copula Effect on Investment Portfolio of an Insurance Company / Junginių Įtakos Draudimo Kompanijos Investiciniam Portfeliui Tyrimas

Pranevičius

Šutienė

2008

Technological and Economic Development of Economy

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Abstract. For an insurance company, the planning has to be carried out under uncertainty. Thus, the decision making model includes the parameters that are not completely known at the current point of time, when the decision has to be taken. These parameters can be named as risk factors. The activity of insurance company is affected by many risk factors, thus the multivariate uncertainty space, where the correlations among these factors are possible, can be constructed. For their dependency structure, the alternative method -copula functions -are employed, which allows to model the non-linear dependencies between the correlated stochastic variables. The purpose of this work is to explore the copula effect on the investment portfolio of the insurance company. The insurance business is influenced by a large number of stochastic parameters, and decisions concerning the assets that must be invested over time to cover liabilities and to achieve goals subject to various uncertainties and various constraints are considered. Two approaches of making decision models under uncertainty are applied in the integrated dynamic management of insurance company's financial assets and liabilities. One of them allows to evaluate the company's strategy and technically is based on stochastic simulation. The other approach generates a strategy from the stochastic optimization model. Two copula functions -Gaussian copula and Student's t-copula -concerning the investment performance are employed while generating the set of scenarios for representing the behaviour of risk factors in the multivariate structure.

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Shape-based scenario generation using copulas

Abstract: Stochastic programming, Scenario generation, Copulas,

Cited by 62 publications

References 30 publications

A copula-based heuristic for scenario generation

A copula-based heuristic for scenario generation

Scenario generation with distribution functions and correlations

Copula Effect on Investment Portfolio of an Insurance Company / Junginių Įtakos Draudimo Kompanijos Investiciniam Portfeliui Tyrimas

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