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Discussion papers, SFB 386, LMU München >
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http://hdl.handle.net/10419/31037
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| Title: | | Pair-copula constructions of multiple dependence  |
| Authors: | | Aas, Kjersti Czado, Claudia Frigessi, Arnoldo Bakken, Henrik |
| Issue Date: | | 2006 |
| Series/Report no.: | | Discussion paper // Sonderforschungsbereich 386 der Ludwig-Maximilians-Universität München 487 |
| Abstract: | | Building on the work of Bedford, Cooke and Joe, we show how multivariate data, which exhibit complex patterns of dependence in the tails, can be modelled using a cascade of pair-copulae, acting on two variables at a time. We use the pair-copula decomposition of a general multivariate distribution and propose a method to perform inference. The model construction is hierarchical in nature, the various levels corresponding as simple building blocs. Pair-copula decomposed models also represent a very flexible way to construct higher-dimensional coplulae. We apply the methodology to a financial data set. Our approach represents the first step towards developing of an unsupervised algorithm that explores the space of possible pair-copula models, that also can be applied to huge data sets automatically. |
| Persistent Identifier of the first edition: | | urn:nbn:de:bvb:19-epub-1855-3 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion papers, SFB 386, LMU München
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