Constructing hierarchical Archimedean copulas with Lévy subordinators |
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| Authors: | Christian Hering |
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| Affiliation: | a Ulm University, Institute of Number Theory and Probability Theory, Helmholtzstraße 18, 89081 Ulm, Germany
b Technische Universität München, HVB Stiftungsinstitut für Finanzmathematik, Boltzmannstraße 3, 85748 Garching, Germany |
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| Abstract: | A probabilistic interpretation for hierarchical Archimedean copulas based on Lévy subordinators is given. Independent exponential random variables are divided by group-specific Lévy subordinators which are evaluated at a common random time. The resulting random vector has a hierarchical Archimedean survival copula. This approach suggests an efficient sampling algorithm and allows one to easily construct several new parametric families of hierarchical Archimedean copulas. |
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| Keywords: | 60E10 60E05 60E07 62H99 65C10 |
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