Semiparametric bivariate Archimedean copulas
AbstractWhile parametric copulas often lack expressive capacity to capture the complex dependencies that are usually found in empirical data, non-parametric copulas can have poor generalization performance because of overfitting. A semiparametric copula method based on the family of bivariate Archimedean copulas is introduced as an intermediate approach that aims to provide both accurate and robust fits. The Archimedean copula is expressed in terms of a latent function that can be readily represented using a basis of natural cubic splines. The model parameters are determined by maximizing the sum of the log-likelihood and a term that penalizes non-smooth solutions. The performance of the semiparametric estimator is analyzed in experiments with simulated and real-world data, and compared to other methods for copula estimation: three parametric copula models, two semiparametric estimators of Archimedean copulas previously introduced in the literature, two flexible copula methods based on Gaussian kernels and mixtures of Gaussians and finally, standard parametric Archimedean copulas. The good overall performance of the proposed semiparametric Archimedean approach confirms the capacity of this method to capture complex dependencies in the data while avoiding overfitting.
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Bibliographic InfoArticle provided by Elsevier in its journal Computational Statistics & Data Analysis.
Volume (Year): 55 (2011)
Issue (Month): 6 (June)
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Web page: http://www.elsevier.com/locate/csda
Archimedean copulas Natural cubic splines Semiparametric dependence model Tail dependence Regular variation;
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