Using copulas in risk analysis

Nearly every well installation process nowadays relies on some sort of risk assessment study, given the high costs involved. Those studies focus mostly on estimating the total time required by the well drilling and completion operations, as a way to predict the final costs. Among the different techniques employed, the Monte Carlo simulation currently stands out as the preferred method. One relevant aspect which is frequently left out from simulation models is the dependence relationship among the processes under consideration. That omission can have a serious impact on the results of risk assessment and, consequently, on the conclusions drawn from them. In general, practitioners do not incorporate the dependence information because that is not always an easy task. This paper intends to show how Copula functions may be used as a tool to build correlation-aware Monte Carlo simulation models.