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The copula based on multivariate t-distribution with vector of degrees of freedom

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  • Balaev, Alexey

    (Higher School of Economics, Moscow, Russia)

Abstract

In this paper we construct a copula based on the multivariate t-distribution with vector degrees of freedom parameter, which possesses significant advantages over the copula based on the standard multivariate t-distribution. We derive the standardized version of this copula, which is simpler from the computational viewpoint. As the application of the standardized t-copula with vector of degrees of freedom we consider VAR-MGARCH models. Such models are often used for multivariate analysis of asset returns on financial markets. We also propose an algorithm of simulating random vectors with multivariate t-distribution or t-copula with vector of degrees of freedom.

Suggested Citation

  • Balaev, Alexey, 2014. "The copula based on multivariate t-distribution with vector of degrees of freedom," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 90-110.
    • Handle: RePEc:ris:apltrx:0231
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    References listed on IDEAS

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    More about this item

    Keywords

    copula; multivariate t-distribution; vector of degrees of freedom; tail dependence; simulation algorithm.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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