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Advancing Financial Modeling: Integrating Copulas and Deep Learning for Enhanced Risk Management and Derivative Pricing

In: Information Systems and Technological Advances for Sustainable Development

Author

Listed:
  • Mohammed Ahnouch

    (Abdelmalek Essaadi University
    PRISM, Université Paris 1 Panthéon Sorbonne)

  • Lotfi Elaachak

    (Abdelmalek Essaadi University)

  • Abderrahim Ghadi

    (Abdelmalek Essaadi University)

Abstract

This review paper systematically examines the integration of copula-based methods into the realms of deep learning and machine learning, with a focus on their impact on the accuracy and sophistication of financial models. It encompasses an analysis of the application of copulas in the pricing of derivatives and delves into the enhancement of loss computation within credit portfolios and CDO pricing frameworks. Additionally, the paper scrutinizes the use of copulas in the calculation of Credit Valuation Adjustment (CVA) and the management of wrong way risk. Through an exhaustive literature review and synthesis of current practices, this paper aims to chart a comprehensive overview of the state-of-the-art in copula applications across financial modeling.

Suggested Citation

  • Mohammed Ahnouch & Lotfi Elaachak & Abderrahim Ghadi, 2024. "Advancing Financial Modeling: Integrating Copulas and Deep Learning for Enhanced Risk Management and Derivative Pricing," Lecture Notes in Information Systems and Organization, in: Mohamed Ben Ahmed & Anouar Abdelhakim Boudhir & Hany Farhat Abd Elhamid Attia & Adriana Eštoková & M (ed.), Information Systems and Technological Advances for Sustainable Development, pages 30-37, Springer.
    • Handle: RePEc:spr:lnichp:978-3-031-75329-9_4
    DOI: 10.1007/978-3-031-75329-9_4
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