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Modelling dependence

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  • Kallenberg, Wilbert C.M.
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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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    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 42 (2008)
    Issue (Month): 1 (February)
    Pages: 127-146

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    Handle: RePEc:eee:insuma:v:42:y:2008:i:1:p:127-146

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    Web page: http://www.elsevier.com/locate/inca/505554

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    1. Panchenko, Valentyn, 2005. "Goodness-of-fit test for copulas," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 355(1), pages 176-182.
    2. Fermanian, Jean-David, 2005. "Goodness-of-fit tests for copulas," Journal of Multivariate Analysis, Elsevier, Elsevier, vol. 95(1), pages 119-152, July.
    3. Janic-Wroblewska, A. & Kallenberg, W. C. M. & Ledwina, T., 2004. "Detecting positive quadrant dependence and positive function dependence," Insurance: Mathematics and Economics, Elsevier, Elsevier, vol. 34(3), pages 467-487, June.
    4. Jesus Gonzalo & Jose Olmo, 2005. "Contagion Versus Flight To Quality In Financial Markets," Economics Working Papers, Universidad Carlos III, Departamento de Economía we051810, Universidad Carlos III, Departamento de Economía.
    5. Biau, Gérard & Wegkamp, Marten, 2005. "A note on minimum distance estimation of copula densities," Statistics & Probability Letters, Elsevier, Elsevier, vol. 73(2), pages 105-114, June.
    6. Panchenko, V., 2004. "Goodness-of-fit test for copulas," CeNDEF Working Papers, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance 04-16, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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