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Tails of Correlation Mixtures of Elliptical Copulas
Year Of Publication: 2009
Month Of Publication: December
Pages: 21
Download Count: 4
View Count: 1356
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 12-23-2010
Publisher: Administrator
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.
This document is published in Insurance: Mathematics and Economics (volume 48, number 1) January 2011, pp. 153-160.
Segers, Johan Sign in to follow this author
Manner, Hans Sign in to follow this author
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