Dynamic Asset Allocation Based on Copula and CVaR

This paper discusses the asset allocation problem for a portfolio under dynamic copula model. Financial market is always influenced by the fluctuations of economic factors, the dependence structure of financial data doesn´t keep static all the time. Dynamic copula is an efficient method to deal with the problem. In this paper, we describe the change of dependence structure among portfolio assets by analyzing the change of copulas. We choose four assets from Chinese market to construct a portfolio. We manage to detect the change points of dependence structure among assets, and then perform dynamic asset allocation based on CVaR optimization.