Copulas

Copulas are mathematical tools used to describe and analyze how two or more variables are related or connected, beyond just their individual behaviors. They allow us to understand the dependence structure between variables, such as how they move together during different situations, regardless of their individual distributions. For example, in finance, copulas can model how different asset prices tend to behave jointly during market swings. Essentially, they help us capture complex relationships between variables in a flexible way, facilitating better risk management, forecasting, and decision-making across various fields.