Dependence modelling of financial returns using generalised normal mixtures
Abstract
It has long been known that financial returns are often not normally distributed, but the technical
difficulties of dealing with non-normal distributions have often stood on the way of using them
in financial modeling. In particular, in dependence modelling of financial returns, using copulas
and Normal Mixtures as marginal, for the practical value of risk management, the choice of
marginal distribution is key. In this work, generalized normal mixtures are constructed, their
properties studied, parameter estimation is achieved using the EM algorithm and application in
Risk Management and portfolio optimization considered.
Collections
- SIMC 2019 [99]