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Estimation of Hierarchical Archimedean Copulas as a Shortest Path Prob lem

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  • Matsypura, Dmytro
  • Neo, Emily
  • Prokhorov, Artem

Abstract

We formulate the problem of finding and estimating the optimal hierarchical Archimedean copula as an amended shortest path problem. The standard network flow problem is amended by certain constraints specific to copulas, which limit scalability of the problem. However, we show in dimensions as high as twenty that the new approach dominates the alternatives which usually require recursive estimation or full enumeration.

Suggested Citation

  • Matsypura, Dmytro & Neo, Emily & Prokhorov, Artem, 2016. "Estimation of Hierarchical Archimedean Copulas as a Shortest Path Prob lem," Working Papers 2123/14745, University of Sydney Business School, Discipline of Business Analytics.
    • Handle: RePEc:syb:wpbsba:2123/14745
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    References listed on IDEAS

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    1. Okhrin, Ostap & Okhrin, Yarema & Schmid, Wolfgang, 2013. "On the structure and estimation of hierarchical Archimedean copulas," Journal of Econometrics, Elsevier, vol. 173(2), pages 189-204.
    2. Kojadinovic, Ivan & Yan, Jun, 2010. "Modeling Multivariate Distributions with Continuous Margins Using the copula R Package," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 34(i09).
    3. Hofert, Marius, 2011. "Efficiently sampling nested Archimedean copulas," Computational Statistics & Data Analysis, Elsevier, vol. 55(1), pages 57-70, January.
    4. Anatolyev, Stanislav & Khabibullin, Renat & Prokhorov, Artem, 2014. "An algorithm for constructing high dimensional distributions from distributions of lower dimension," Economics Letters, Elsevier, vol. 123(3), pages 257-261.
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    Cited by:

    1. Mai Jan-Frederik, 2019. "Simulation algorithms for hierarchical Archimedean copulas beyond the completely monotone case," Dependence Modeling, De Gruyter, vol. 7(1), pages 202-214, January.
    2. Górecki J. & Hofert M. & Holeňa M., 2017. "Kendall’s tau and agglomerative clustering for structure determination of hierarchical Archimedean copulas," Dependence Modeling, De Gruyter, vol. 5(1), pages 75-87, January.

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    More about this item

    Keywords

    copulas; network flow problem;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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