DEFINITION of 'Copula'
A statistical measure that represents a multivariate uniform distribution, which examines the association or dependence between many variables. Although the statistical calculation of a copula was invented in 1957, it was not applied to financial markets and finance until the late '90s.
BREAKING DOWN 'Copula'
Copulas are a mathematical tool used in finance to help identify economic capital adequacy, market risk, credit risk and operational risk. Interdependence of returns of two or more assets is usually calculated using the correlation coefficient. However, correlation only works well with normal distributions, while distributions in financial markets are mostly skewed. The copula, therefore, has been applied to areas of finance such as option pricing and portfolio valueatrisk to deal with the skewness.

Multivariate Model
A popular statistical tool that uses multiple variables to forecast ... 
Uniform Distribution
In statistics, a type of probability distribution in which all ... 
Correlation Coefficient
A measure that determines the degree to which two variable's ... 
Probability Distribution
A statistical function that describes all the possible values ... 
Skewness
Describe asymmetry from the normal distribution in a set of statistical ... 
Statistics
A type of mathematical analysis involving the use of quantified ...

Investing
Understanding Statistics
Statistics provide the means to analyze data and then summarize it into a numerical form. 
Investing
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Investing
What's the Correlation Coefficient?
The correlation coefficient is a measure of how closely two variables move in relation to one another. If one variable goes up by a certain amount, the correlation coefficient indicates which ... 
Trading
Trading With Gaussian Models Of Statistics
The entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications. 
Investing
Using Normal Distribution Formula To Optimize Your Portfolio
Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk. 
Investing
What a Normal Distribution Means
Normal distribution describes a symmetrical data distribution, where most of the results lie near the mean. 
Investing
Correlation
In the world of finance, correlation is a statistical measure of how two securities move in relation to each other. 
Investing
RSquared
Learn more about this statistical measurement used to represent movement between a security and its benchmark. 
Investing
What's Skewness?
Skewness describes how a data distribution leans.

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Can the correlation coefficient be used to measure dependence?
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What is the correlation between American stock prices and the value of the U.S. dollar?
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