LéVy Copulas

Lévy copulas characterize the dependence among components of multidimensional Lévy processes. They are similar to copulas of probability distributions, but are defined at the level of Lévy measures. Lévy copulas separate the dependence structure of a Lévy measure from the one-dimensional marginal measures, enabling one to construct parametric multidimensional Lévy models by combining arbitrary one-dimensional Lévy processes with a Lévy copula from a parametric family. In finance, Lévy copulas are useful to model joint moves of several assets in various settings, including portfolio risk management, option pricing, insurance, and operational risk.