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Multivariate Variance Gamma and Gaussian dependence: a study with copulas

Author

Listed:
  • Elisa Luciano
  • Patrizia Semeraro
Abstract
This paper explores the dynamic dependence properties of a Levy process, the Variance Gamma, which has non Gaussian marginal features and non Gaussian dependence. In a static context, such a non Gaussian dependence should be represented via copulas. Copulas, however, are not able to capture the dynamics of dependence. By computing the distance between the Gaussian copula and the actual one, we show that even a non Gaussian process, such as the Variance Gamma, can "converge" to linear dependence over time. Empirical versions of different dependence measures confirm the result.

Suggested Citation

  • Elisa Luciano & Patrizia Semeraro, 2008. "Multivariate Variance Gamma and Gaussian dependence: a study with copulas," Carlo Alberto Notebooks 96, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:96
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    File URL: https://www.carloalberto.org/wp-content/uploads/2018/11/no.96.pdf
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    Citations

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    Cited by:

    1. Boris Buchmann & Benjamin Kaehler & Ross Maller & Alexander Szimayer, 2015. "Multivariate Subordination using Generalised Gamma Convolutions with Applications to V.G. Processes and Option Pricing," Papers 1502.03901, arXiv.org, revised Oct 2016.
    2. Buchmann, Boris & Kaehler, Benjamin & Maller, Ross & Szimayer, Alexander, 2017. "Multivariate subordination using generalised Gamma convolutions with applications to Variance Gamma processes and option pricing," Stochastic Processes and their Applications, Elsevier, vol. 127(7), pages 2208-2242.

    More about this item

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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