tail dependence

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Tail Dependence. Tail Dependence. “When sorrows come, they come…in battalions.” King Claudius, Hamlet Prince of Denmark, Act 4 Scene 5 Cooke and Kousky nsf # 0960865. Micro Correlations. Fat Tails. http://www.rff.org/Events/Pages/Introduction-Climate-Change-Extreme-Events.aspx. - PowerPoint PPT Presentation

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Tail Dependence

Tail DependenceFat TailsMicro CorrelationsTail DependenceWhen sorrows come, they comein battalions.King Claudius, Hamlet Prince of Denmark, Act 4 Scene 5Cooke and Kousky nsf# 0960865

http://www.rff.org/Events/Pages/Introduction-Climate-Change-Extreme-Events.aspx1

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Heres what killed your 401(k) Gaussian Copula3Tail dependence: Correlations are in the High (or low) values

4 Two loss variablesindependent dependent (0.1) 401K killer

5 Copulaindependent dependent (0.1) 401K killer

6 Sums of 40 loss variables independent dependent 401K killer

7 Copula: sums of 40independent 401K killer

8 Sums of 40401K killer Tail dependent

9 Copula: sums of 40401K killer tail dependent

10 Copula: sums of 40401K killer tail dependent

11 Copula: sums of 40401K killer tail dependent

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Tail dependence Bad things happen together fatally flawed way to assess risk13Tail Dependence:Ignore it at your 401Ks perilFat TailsMicro CorrelationsThe Unholy Trinity:http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=2094914

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