copulas-dependence-modeling

What problem does it solve?

This Skill addresses the limitations of linear correlation by modeling complex, non-linear dependencies between financial assets using copulas, enabling more accurate risk assessment and scenario generation.

Core Features & Use Cases

• Copula Fitting: Calibrate various copula families (Gaussian, t, Archimedean) to observed data.
• Scenario Generation: Create dependence-preserving scenarios for stress testing and risk aggregation.
• Tail-Dependence Estimation: Quantify extreme joint movements beyond simple correlation.
• Use Case: When assessing portfolio risk under market stress, this Skill can generate realistic joint extreme scenarios for multiple assets, going beyond what linear models can capture.

Quick Start

Use the copulas-dependence-modeling skill to fit candidate copula families to the provided data and generate dependence-preserving scenarios.