Dependence modelling of financial returns using generalised normal mixtures
Date
2019
Authors
Maina, Calvin
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
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.
Description
Paper presented at the 5th Strathmore International Mathematics Conference (SIMC 2019), 12 - 16 August 2019, Strathmore University, Nairobi, Kenya
Keywords
Bessel function of the third kind, Normal Mixtures, EM algorithm, copulas