Patent ID: 8170941

Claim:
A system for generating random vectors for estimating portfolio risk, comprising: a memory comprising a database configured to store historical financial variable data of financial assets; a processor configured to execute computer executable code stored in program modules, comprising: an estimation module estimating parameters of a copula comprising an empirical sub-copula and a parametric sub-copula, wherein the empirical sub-copula comprises a d-dimensional unit hypercube I d comprising a middle part M d (ε) and a narrow strip E d (ε), the middle part M d (ε) derived according to the representation: M d (ε)=[ε, 1−ε] d and the narrow strip E d (ε) derived according to the representation: E d (ε)= I d −[ε, 1−ε] d where the d-dimensional unit hypercube I d comprises projections on each of a set of d axes are all uniform distributions on [0,1], and a parametric sub-copula, wherein the parametric sub-copula is derived from a multivariate distribution according to the representation: X:=μ+γW+g ( W ) Z where Z is an infinitely divisible random vector, W is a positive random variable independent of Z, g(x): [0, ∞)−>[0, ∞) is a monotonically increasing function, and μ and γ are two real-valued vectors on the narrow strip E d (ε), the empirical sub-copula being defined using the same multivariate distribution; a generation module generating random vectors from the copula; and a risk module calculating risk for the financial assets based on the random vectors.