Copulas Dependence Modeling

objective

Model cross-asset dependence beyond linear correlation using calibrated copulas and scenario validation.

workflow

1. define variable universe, marginal models, and sampling horizon.
2. transform marginals to pseudo-observations with rank-consistent preprocessing.
3. fit candidate copula families and compare likelihood plus tail metrics.
4. generate dependence-preserving scenarios and validate stress behavior.
5. deploy only when tail validation and stability checks remain within thresholds.

required validation

• in-sample and out-of-sample log-likelihood stability by copula family.
• tail co-exceedance fit versus realized joint tail events.
• parameter drift across rolling calibration windows.
• rank-dependence consistency under regime changes.
• scenario coverage for extreme joint moves.