Pair-copula constructions of multiple dependence
by Professor Claudia Czado
Abstract: Building on the work of Bedford, Cooke and Joe, we show how multivariate
data, which exhibit complex patterns of dependence in the tails, can be modelled using a cascade of pair-copulae, acting on two variables at a time. We use the pair-copula decomposition of a general multivariate distribution and propose a method to perform inference. The model
construction is hierarchical in nature, the various levels corresponding to the incorporation of more variables in the conditioning sets, using
pair-copulae as simple building blocks. Pair-copula decomposed models
also represent a very flexible way to construct higher-dimensional copulae. We apply the methodology to a financial data set. This is joint work with K. Aas, A. Frigessi, H. Bakken and A. Min.
For More Information: Ass Prof Konstantin Borovkov K.Borovkov@ms.unimelb.edu.au