Tails of correlation mixtures of elliptical copulas
Correlation mixtures of elliptical copulas arise when the correlation parameter is driven itself by a latent random process. For such copulas, both penultimate and asymptotic tail dependence are much larger than for ordinary elliptical copulas with the same unconditional correlation. Furthermore, for Gaussian and Student t-copulas, tail dependence at sub-asymptotic levels is generally larger than in the limit, which can have serious consequences for estimation and evaluation of extreme risk. Finally, although correlation mixtures of Gaussian copulas inherit the property of asymptotic independence, at the same time they fall in the newly defined category of near asymptotic dependence. The consequences of these findings for modeling are assessed by means of a simulation study and a case study involving financial time series.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew Patton, 2004.
"Modelling Asymmetric Exchange Rate Dependence,"
wp04-04, Warwick Business School, Finance Group.
- Jun Yu & Renate Meyer, 2004.
"Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison,"
23-2004, Singapore Management University, School of Economics.
- Jun Yu & Renate Meyer, 2006. "Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison," Econometric Reviews, Taylor & Francis Journals, vol. 25(2-3), pages 361-384.
- Hashorva, Enkelejd, 2008. "Tail asymptotic results for elliptical distributions," Insurance: Mathematics and Economics, Elsevier, vol. 43(1), pages 158-164, August.
- Liesenfeld, Roman & Richard, Jean-Francois, 2003. "Univariate and multivariate stochastic volatility models: estimation and diagnostics," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 505-531, September.
- Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
- Hafner, Christian M. & Reznikova, Olga, 2010. "Efficient estimation of a semiparametric dynamic copula model," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2609-2627, November.
- Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January.
- Hashorva, Enkelejd, 2005. "Extremes of asymptotically spherical and elliptical random vectors," Insurance: Mathematics and Economics, Elsevier, vol. 36(3), pages 285-302, June.
- Frahm, Gabriel & Junker, Markus & Schmidt, Rafael, 2005. "Estimating the tail-dependence coefficient: Properties and pitfalls," Insurance: Mathematics and Economics, Elsevier, vol. 37(1), pages 80-100, August.
- Cambanis, Stamatis & Huang, Steel & Simons, Gordon, 1981. "On the theory of elliptically contoured distributions," Journal of Multivariate Analysis, Elsevier, vol. 11(3), pages 368-385, September.
- Asimit, Alexandru V. & Jones, Bruce L., 2007. "Extreme behavior of bivariate elliptical distributions," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 53-61, July.
When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:48:y:2011:i:1:p:153-160. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.