Computation of copulas by Fourier methods

preprint2014arXivOpen access

Abstract

We provide an integral representation for the (implied) copulas of dependent random variables in terms of their moment generating functions. The proof uses ideas from Fourier methods for option pricing. This representation can be used for a large class of models from mathematical finance, including Lévy and affine processes. As an application, we compute the implied copula of the NIG Lévy process which exhibits notable time-dependence.

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