The Copula

A copula is a statistical tool used to understand and model how multiple variables relate to each other, especially their dependence or connection. Unlike simply looking at each variable separately, a copula captures the way they move together—whether they tend to increase or decrease together, or behave independently. This is useful in fields like finance, where understanding how different assets or risks are linked is important. Essentially, a copula allows us to build a complete picture of the joint behavior of variables based on their individual behaviors, making it a powerful method for analyzing complex relationships.