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arXiv · 1612.02848

Extending one-factor copulas

Nathan Uyttendaele·Gildas Mazo
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Abstract

So far, one-factor copulas induce conditional independence with respect to a latent factor. In this paper, we extend one-factor copulas to conditionally dependent models. This is achieved through new representations which allow to build new parametric factor copulas with a varying conditional dependence structure. We discuss estimation and properties of these representations. In order to distinguish between conditionally independent and conditionally dependent factor copulas, we provide a novel statistical test which does not assume any parametric form for the conditional dependence structure. Illustrations of our framework are provided through examples, numerical experiments, as well as a real data analysis.

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Nathan Uyttendaele, Gildas Mazo. 2016-12-08. Extending one-factor copulas. https://arxiv.org/abs/1612.02848

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