Modelling dependence |
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Authors: | Wilbert CM Kallenberg |
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Institution: | Department of Applied Mathematics, Faculty of Electrical Engineering, Mathematics and Computer Science, University of Twente, P.O. Box 217, 7500 AE Enschede, The Netherlands |
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Abstract: | A new way of choosing a suitable copula to model dependence is introduced. Instead of relying on a given parametric family of copulas or applying the other extreme of modelling dependence in a nonparametric way, an intermediate approach is proposed, based on a sequence of parametric models containing more and more dependency aspects. In contrast to a similar way of thinking in testing theory, the method here, intended for estimating the copula, often requires a somewhat larger number of steps. One approach is based on exponential families, another on contamination families. An extensive numerical investigation is supplied on a large number of well-known copulas. The method based on contamination families is recommended. A Gaussian start in this approximation looks very promising. |
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Keywords: | 62H12 62H20 62P05 |
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