Which of the following isnot an important benefit of using copula functions for correlated default?
A) Copula distribution functions are computationally more tractable than multivariate normal distributions.
B) Copulas allow separation of the marginal distribution functions and the correlation function.
C) Copulas allow coupling of multivariate distributions where the marginals may be chosen from varied probability distributions.
D) Copulas allow flexible modeling of the tails of the joint distribution.

Question

Which of the following isnot an important benefit of using copula functions for correlated default? 
A) Copula distribution functions are computationally more tractable than multivariate normal distributions.
B) Copulas allow separation of the marginal distribution functions and the correlation function.
C) Copulas allow coupling of multivariate distributions where the marginals may be chosen from varied probability distributions.
D) Copulas allow flexible modeling of the tails of the joint distribution.

Quizplus · Accepted Answer

Copula functions are actually known for allowing flexible modeling of tails and coupling of multivariate distributions with varied marginals, making them computationally attractive for modeling correlated defaults. The computational tractability compared to multivariate normal distributions is not a recognized benefit; in fact, copulas can be complex to implement and understand.

Which of the Following Isnot an Important Benefit of Using