Empirical comparison of skewed t-copula models for insurance and financial data
| Autor: | Liwei Huang, Arkady Shemyakin |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Statistics and Probability
Empirical comparison Applied Mathematics 05 social sciences 01 natural sciences Statistics::Computation 010104 statistics & probability Modeling and Simulation 0502 economics and business Econometrics Statistics::Methodology Multivariate t-distribution 050207 economics 0101 mathematics Mathematics |
| Zdroj: | Model Assisted Statistics and Applications. 15:351-361 |
| ISSN: | 1875-9068 1574-1699 |
| Popis: | Skewed t-copulas recently became popular as a modeling tool of non-linear dependence in statistics. In this paper we consider three different versions of skewed t-copulas introduced by Demarta and McNeill; Smith, Gan and Kohn; and Azzalini and Capitanio. Each of these versions represents a generalization of the symmetric t-copula model, allowing for a different treatment of lower and upper tails. Each of them has certain advantages in mathematical construction, inferential tools and interpretability. Our objective is to apply models based on different types of skewed t-copulas to the same financial and insurance applications. We consider comovements of stock index returns and times-to-failure of related vehicle parts under the warranty period. In both cases the treatment of both lower and upper tails of the joint distributions is of a special importance. Skewed t-copula model performance is compared to the benchmark cases of Gaussian and symmetric Student t-copulas. Instruments of comparison include information criteria, goodness-of-fit and tail dependence. A special attention is paid to methods of estimation of copula parameters. Some technical problems with the implementation of maximum likelihood method and the method of moments suggest the use of Bayesian estimation. We discuss the accuracy and computational efficiency of Bayesian estimation versus MLE. Metropolis-Hastings algorithm with block updates was suggested to deal with the problem of intractability of conditionals. |
| Databáze: | OpenAIRE |
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