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Coskewness and Cokurtosis

  • Just as the concept of variance was extended to a set of two variables as covariance, concept of skewness and cokurtosis can be extended to the set of more variables as coskewness. It is possible that the set of variables have same mean and variable but not the same skewness and kurtosis because the ranking of values will be different for these two variables at different point of time
  • Most risk models ignore the effects of coskewness and cokurtosis
  • The main reason for this is that as the number of variables increases, the number of coskewness and cokurtosis terms increase rapidly

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