Copula based model correction for bivariate Bernoulli financial series Available to Purchase

In this paper we address the problem of simultaneously modeling two financial series of the daily returns' direction (up/down variation) of an asset. We describe jointly both series by using a new family of Markov models called Partition Markov Models. This family has the characteristic of finding a Markov model with a minimal number of parameters. However, sometimes the sample size does not allow to extract enough information about the model. Then, we develop a copula based methodology to correct the joint probabilities by using the marginal models obtained by the Partition Markov Models.