New factor copula revolutionizes stock portfolio risk forecasting with high accuracy.
The article explores different copulas to predict risk for a stock portfolio. They use factors like data frequency and copula type to make these predictions. The Student-t copula is best for extreme risk scenarios, while high frequency data with the Student-t copula gives the most accurate risk forecasts. The factor copula is difficult to estimate and needs large simulations for accuracy, making it computationally challenging.