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.

Covariance
A measure of the degree to which returns on two risky assets ... 
Default Risk
The event in which companies or individuals will be unable to ... 
Credit Risk
The risk of loss of principal or loss of a financial reward stemming ... 
Correlation
In the world of finance, a statistical measure of how two securities ... 
Binomial Option Pricing Model
An options valuation method developed by Cox, et al, in 1979. ... 
Value At Risk  VaR
A statistical technique used to measure and quantify the level ...

Bonds & Fixed Income
Corporate Bonds: An Introduction To Credit Risk
Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy. 
Insurance
The Dangers Of OverDiversifying Your Portfolio
If you diversify too much, you might not lose much, but you won't gain much either. 
Active Trading
Modern Portfolio Theory: Why It's Still Hip
See why investors today still follow this old set of principles that reduce risk and increase returns through diversification. 
Mutual Funds & ETFs
Top 3 Muni California Mutual Funds
Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability. 
Investing Basics
What Does In Specie Mean?
In specie describes the distribution of an asset in its physical form instead of cash. 
Economics
Calculating Cross Elasticity of Demand
Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another. 
Fundamental Analysis
Emerging Markets: Analyzing Colombia's GDP
With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy. 
Investing
What is Descriptive Statistics?
Descriptive statistics is the term applied to meaningful data analysis. 
Fundamental Analysis
Create a Monte Carlo Simulation Using Excel
How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel. 
Fundamental Analysis
Emerging Markets: Analyzing Chile's GDP
Chile has become one of the great economic success stories of Latin America.

Is Colombia an emerging market economy?
Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What is the utility function and how is it calculated?
In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >> 
What does marginal utility tell us about consumer choice?
In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >> 
What is the difference between JIT (just in time) and CMI (customer managed inventory)?
Justintime (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >> 
What are some examples of Apple and Google's bestselling product lines?
There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>